Do Australians actually want cheaper housing? We're finding out fast - ABC News & Headlines – Australian Broadcasting Corporation

Australia's housing crisis has entered new territory.  (ABC News: John Gunn)

Australia's housing crisis has entered a new phase: a little less conversation, a little more action.

The first seeds were planted three years ago, with a landmark national agreement to build more homes. The target, 1.2 million in five years, is likely doomed. But what mattered was that a target was set at all. After years of lip service, leaders had promised to act on the root cause.

Then there was last year's economic roundtable. After much fanfare, the closed-door event had seemed like a fizzer. But for Treasurer Jim Chalmers, it helped build the case that Labor's old policy to wind back negative gearing could be reinvented, and framed as a leg up for home buyers over investors.

A policy to boost supply and a policy to slash demand. Throw in the highest interest rates in 18 years, and all of a sudden a housing market that seemed as if it would never turn is turning very fast indeed. This week saw the steepest drop-off in new home loans ever recorded.

Commentators had long wondered whether, for all the hand-wringing about the housing crisis, Australians would actually want a solution when it came, since, one way or another, cheaper homes for the young can only mean less valuable homes for those who already own them.

But no more need to wonder: we're finding out. A tumbling market may not have been federal Labor's ideal pathway to affordable housing, but after months of dithering, the government took a tentative step this week towards embracing the chaos, framing it as a win for homebuyers.

In the coming weeks and months, Labor governments in Australia's two largest states will put their own higher-density plans to voters. At federal and state levels, Liberals are betting voters will dislike the prescribed cure worse than the sickness.

Labor did not expect its changes to the capital gains tax and negative gearing to tank house prices. Treasury analysis predicted prices would still grow, but by 2 per cent less. Chalmers has repeatedly said he is "not targeting a particular price".

Nor did it want prices to tank. In 2024, Housing Minister Clare O'Neil said it was her "strong view" that falling prices would be bad.

"Our policies are not going to reduce house prices. We want house prices to grow sustainably," she said then.

Clare O'Neil has been caught between championing affordability and protecting people's investments.  (ABC News: Luke Stephenson)

But now they have fallen. The median national house price is 5.6 per cent below its March peak, and 3.9 per cent for apartments. The drop-off has been sharper in Melbourne and Sydney, and some analysts predict double-digit declines.

Other indicators point in the same direction. The auction clearance rate has plunged below 50 per cent, compared to its long-run average of 60 per cent. And new figures this week showed a record 15 per cent dip in new loans between June and September.

The chill was evident across the board, but it was clearly worse for investors (31 per cent) than for homebuyers (5 per cent). First home buyers (8 per cent) fared worse than established homebuyers, but still far better than investors.

High rates have clearly played a role. But they do not explain why investors are falling away by "so much more than in previous interest rate increasing cycles", as Reserve Bank governor Michele Bullock observed last week.

"[That] suggests something else is going on here, and [that] is the tax changes," she said. In other words, the tax changes are doing what they were designed to do: discourage investors.

Until this week, the government had been skittish about embracing that. Even after opinion polls suggested a majority of Australians believed that prices needed to fall, ministers were nervous about embracing the nosedive.

But on Wednesday, O'Neil ditched the script and stopped equivocating.

"We've had a housing market geared towards investors for a generation, and where did it get us? Plummeting ownership, out-of-control house price increases, and a generation losing hope," she said.

"These numbers show the balance is shifting back … It is absolutely the case that volumes are down, as you would expect in a period where prices are softening. But these figures also clearly show a strong shift away from investors and towards Australians buying a home to live in."

It is a risky gambit. First home buyers may be getting a leg up — CBA's Matt Comyn said yesterday their share of new loan applications doubled last month. But a fast-falling market is a risky one to enter, especially with high rates, and it can also chill housing supply.

Liberal housing spokesperson Andrew Bragg seized on the comments, calling them "strange".

"People would look at what Clare O'Neil says and think, 'Well, what planet is she living on? Why is she saying fewer loans is good?' Fewer loans is bad [sic]. We need to see more lending."

A chorus of real estate moguls and personal finance celebrities agree. A prominent example is podcaster Mark Bouris, who predicted in The Australian this week "the longest downturn in our history" and warned: "We're going to have a serious structural hit to people's wealth."

The comments are revealing, hinting at what motivates many critics. Not affordability, but wealth.

That cannot be said of Bragg, one of a handful of politicians who have publicly embraced the idea that lower house prices could be welcome if they happen via a supply boom, not a demand chill.

But for many home owners, wealth is front of mind, and this is just as true on the supply side as it is on the demand side, as state governments are finding out.

In Victoria, the Labor government has pursued the most aggressively pro-supply policy in the country, designating several Melbourne suburban hubs as so-called "activity centres", where high-density towers will be allowed in narrow strips and medium density in wider surrounds.

Typical of the cynical political style of former premier Daniel Andrews and his successor Jacinta Allan, many zones are in places Labor will never win, including in Brighton and state Liberal leader Jess Wilson's Kew.

Jess Wilson said a Coalition government would shift the focus of high-rise development to Melbourne's CBD and inner city. (ABC News)

Locals have been whipped into a frenzy by dystopian artists' impressions of amorphous black skyscrapers invading their leafy shopping strips, a feature of media coverage.

Kew and Brighton will hardly shape the election, which pundits predict Labor will lose for other reasons, but Wilson has vowed to scrap the plan and give local councils a veto if elected.

A similar dynamic is emerging in Sydney, where the Minns Labor government will face voters early in the new year and where designated density zones in suburbs like Woollahra and Crows Nest are also opposed by the opposition leader, Kellie Sloane.

Sloane, echoing Wilson and many Teal MPs, says she supports more housing but frames her complaint as one of consultation and is also promising a council veto.

The argument has a reasonable-sounding guise — "We just want locals to have a say" — but to pro-supply campaigners like Peter Tulip, it is an all-too-familiar smokescreen for building fewer homes, since councils make decisions for existing residents, not potential new ones.

"[The] households who move in would be better off. As would renters and homebuyers who benefit from improved affordability. They greatly outnumber the opponents, but they don't get to vote for the local politicians who are biased against new housing," he said last week.

If Tulip is right, the political numbers game should favour Labor governments at federal and state levels if their policies really do make housing more affordable: they would lose Kew and Crows Nest, but win the country.

In different economic and political circumstances, that reckoning might have come gradually. Instead, we are hurtling towards it.