Jim Chalmers says fewer homes selling at auction may be a ‘good thing’ for first-time buyers

Lead

Australian Treasurer Jim Chalmers has suggested that falling auction clearance rates may be a "good thing" for first-home buyers if it means they face less competition from property investors. His comments came as new data showed home prices in several capital cities had begun to fall and buyer activity at auctions had weakened.

Speaking on Monday, Chalmers acknowledged that Labor's proposed property tax reforms were not the only factor slowing the housing market, pointing to recent interest rate rises and "broader economic conditions." He said: "Some of those clearance rates were coming down already and the budget is not the only factor when people are thinking about participating in those auctions. But if we are making it easier for first home buyers to get a fair crack at auctions, then that's a good thing."

Coverage Comparison

Across the coverage, there is broad agreement on the key data points: home values flatlined in May, with Sydney and Melbourne prices dropping 0.9 per cent and 0.8 per cent respectively. Auction clearance rates have fallen sharply, with the preliminary national clearance rate reaching 58.2 per cent last week, up slightly from the 57.5 per cent low recorded the week prior, according to Cotality data. Ray White, Australia's largest real estate group, reported a preliminary clearance rate of 57.6 per cent for the 509 properties it auctioned on the last Saturday of May.

The coverage also notes that the government's proposed changes to negative gearing and capital gains tax are expected to create a two percentage point drag on property prices over two years, according to Treasury. However, AMP chief economist Shane Oliver is forecasting a 5 per cent hit to property prices over 12 months due to the tax changes. Commonwealth Bank economists have said the market reaction to the budget changes has been faster than expected, which could increase the chance of a sharper downturn.

The Australian Broadcasting Corporation (ABC) provided a human-interest angle through the story of Meg Girdler, a 46-year-old who bought a small Sydney apartment near the market peak in December last year. She says her home is now worth less than she paid for it and feels new home owners have been pushed into a precarious situation. "It's great that investors are being pushed out a little bit. I'm very happy about that," she said. "What I am a little cross about is the fact that nothing was done [before] this point."

Another buyer, Megan Herring, who was the highest bidder at an auction in Yarrabilba, near Brisbane, described the market as "difficult," noting that she had been priced out of other homes by reserve prices.

Key Claims

• Tax reforms and market slowdown: The government's proposed changes to negative gearing and capital gains tax have prompted a slowdown at auctions as people wait to see how the changes will affect them, according to multiple sources. Cotality research director Tim Lawless said the market was already cooling before the budget, but the budget "has had a negative impact on sentiment."

• Interest rate hikes: Three consecutive interest rate hikes have reduced borrowing capacity, making homes more difficult to buy and mortgages more expensive to repay, even if property prices have fallen, as reported by ABC and The Guardian.

• Flatlining prices: Home values flatlined in May, with Sydney and Melbourne recording monthly declines, according to data cited in The Guardian. The flat month came after prices in the state capitals ticked up in early May before reversing after the budget.

• Auction clearance rates: Auction clearance rates have fallen sharply, with preliminary data showing a slight increase last week to 58.2 per cent from a low of 57.5 per cent the week prior. The success rate for auctions on the last Saturday of May was 54.5 per cent, according to Cotality, with finalised rates typically even lower.

• Government's 5% deposit scheme: The government's expanded 5 per cent deposit scheme has been used by more than 260,000 people since 2022, with 59 per cent of participants having a deposit larger than 5 per cent, according to ABC reporting. The scheme allows first-home buyers to borrow up to 95 per cent of a home's value within price limits, avoiding costly lenders mortgage insurance through government guarantees.

• Bid-ask spread widening: The bid-ask spread in the property market has widened, with auction clearance rates falling sharply and vendors facing a more selective buyer pool, as analyzed in ABC reporting.

• Potential market correction: Some analysts and experts have signaled that the property market may correct or fall rapidly if buyer commitment wanes, with signs of weakness already emerging. Cotality has signaled a property market "downturn," and Louis Christopher from SQM Research said "the national housing market has turned, and the downturn is now broadening."

• Impact on housing turnover and rentals: The tax changes may lead to a decrease in housing turnover, potentially resulting in a more stable market but also possibly reducing the availability of rental properties, as noted in the coverage.

Perspectives

Treasurer Jim Chalmers (Australian Government): Chalmers has stated that the tax reforms are not aimed at "a particular price outcome" but instead give Australians trying to enter the market a "fair crack." He has downplayed the budget's effect on auction clearances, attributing the slowdown to interest rate hikes and broader economic conditions.

Property industry and experts: Real estate groups like Ray White have acknowledged the market is "becoming increasingly resilient to uncertainty," while Cotality's Tim Lawless and AMP's Shane Oliver have provided data-driven forecasts on the tax changes' impact. Experts like independent economist Saul Eslake and ANU's Dr Jill Sheppard have highlighted the political sensitivity of property prices, noting that more voters own homes than aspire to buy.

Homebuyers: Buyers like Meg Girdler and Megan Herring have expressed mixed feelings, welcoming the push against investors but concerned about their own financial positions and the difficulty of entering the market.

Opposition politicians: Critics have argued the tax changes represent an "assault on aspiration" that will destroy home values, as reported by The Guardian. The coverage notes that opposition figures have voiced fierce criticism of the reforms.