Impact of Capital Gains Tax Changes on House Prices Revealed

Morgan Winslow

Published: February 11, 2026 11:36 PM ET

Recent discussions about potential changes to the capital gains tax discount in Australia have reignited debates over their effects on the housing market. Experts have varying opinions on how these adjustments might impact house prices and broader economic factors.

Impact of Capital Gains Tax Changes on House Prices

Greg Jericho, chief economist at the Australia Institute, commented that removing the capital gains tax discount might not directly lower house prices. However, he suggested it could help align prices more closely with wages over time. Jericho emphasized the ongoing challenges, stating, “We’ve got 25 years of bad policy to undo.” He warned that continuing with current practices would likely worsen the situation.

Minimal Immediate Impact Expected

Robert Carling, a senior fellow at the Centre for Independent Studies, argued against changes to the capital gains tax discount. He believes any alterations would have a minimal effect on house prices. Carling noted that the focus on housing prices overlooks that these prices represent only about 40% of the assets subject to this tax. He cautioned against changes that could prompt immediate price increases, while also considering the impact on business investment.

Long-Term Revenue and Housing Affordability

According to economist Coates, altering the capital gains tax could generate approximately $6.5 billion annually. He stated that this revenue could either reduce income taxes or be used to support younger Australians. Coates acknowledged that while reducing the discount may not significantly drive down house prices, it could increase owner-occupier shares by up to 5%.

Broader Market Influences

Many experts believe other factors have a greater influence on soaring house prices since 1999. Migration trends, rising incomes, and interest rate fluctuations are cited as significant contributors. Jago Dodson, a professor at RMIT University, noted that reducing the discount could decelerate price growth, but not by drastic margins. He asserted that immediate price reductions of 20% were unlikely.

Encouraging Housing Supply

Liam Davies, an RMIT lecturer, suggested that linking the discount to new builds rather than existing properties could stimulate investment in housing supply. Denita Wawn, from Master Builders Australia, voiced concerns that reducing the discount could make housing investments riskier, potentially lowering overall construction and affecting rental markets.

A Path Forward for Affordability

Dodson pointed out that while immediate impacts on prices are crucial, a more important goal is improving housing affordability. He emphasized the need for the government to employ various strategies to tackle this issue effectively. “It’s a bit like trying to turn around a very large ship,” he remarked.

Key Figures:
- Greg Jericho – Chief Economist, Australia Institute
- Robert Carling – Senior Fellow, Centre for Independent Studies
- Jago Dodson – Professor of Urban Policy, RMIT University
- Liam Davies – RMIT Lecturer
- Denita Wawn – Chief Executive, Master Builders Australia
Revenue Impact: Approximately $6.5 billion annually from capital gains tax changes.
Possible Increase in Owner-Occupier Share: Up to 5%.

The ongoing discourse surrounding capital gains tax reforms continues to highlight the intricate balance needed to address housing affordability while maintaining economic stability in the housing market.