Jim Chalmers admits Labor Budget partly behind house price falls as CBA warns of worst downturn in 40 years

Treasurer Jim Chalmers is insisting Australian property prices will start growing again next year as the Commonwealth Bank predicts the worst downturn in more than four decades.

“If you look at the numbers put out by the Commonwealth Bank, for example, this week, where they had some forecasts - updated forecasts for house prices - they still expected house prices to return to growth next year,” he told ABC Radio National on Thursday.

“And so again, another really important reminder, people don’t buy and sell houses on a week-to-week or month-to-month basis.

“Housing is a longer-term investment. Over time we expect our policies to have an impact on house prices, but house prices will continue to grow, but a bit more modestly and that means more affordable options for more first home buyers to get into the market, which is our objective here.”

Dr Chalmers rejected a suggest Labor’s changes to negative gearing and capital gains tax concessions were solely to blame for the housing downturn, with house values last month falling in every capital city market except Darwin.

“I think that’s one of a number of reasons. I think that there’s not one factor driving softness in the housing market,” he said.

“We saw house prices and auction clearance rates soften even before the Budget, reacting to interest rate changes and developments in the economy more broadly.”

Shadow Treasurer Tim Wilson has seized on the comments as a concession from Labor that its Budget was to blame for the housing market downturn.

“Jim Chalmers has conceded his Budget is destroying the wealth and wages of Australian families, while Australians are living the consequences of his active inflation agenda,” he said.

“The Treasurer confirmed that house price falls can be attributed to his taxes on housing and family savings, and record high interest rates that are driven by his active inflation agenda, finally confirming that house prices are collapsing by design of his Budget.”

The Commonwealth Bank, Australia’s biggest home lender, is predicting a 10 per cent capital city decline from the peak earlier this year to a trough next year.

It is also predicting a national decline of 9 per cent, taking in regional areas, which would be worse than the 8.2 per cent plunge from 2017 to 2019 after the Australian Prudential Regulation Authority cracked down on interest-only loans.

Should that materialise, Australia would be suffering from the worst downturn since 1982 and 1983 when the nation was in the grip of a year-long recession and a drought.

The Commonwealth Bank is even more downbeat about Sydney, forecasting a 13 per cent drop from its February peak, which coincided with the first of the Reserve Bank of Australia’s three interest rate rises.