House price growth slumps but Greens and Coalition want radical reform

Bad landlords would be hit with thousands of dollars in fines, and state governments deprived of billions in revenue if they failed to build enough houses, under duelling Greens and Coalition pitches to ease the housing crisis even as the market cools.

After years of strong price growth blocking new entrants into the housing market, new data shows the surge in capital city values is tapering, led by price falls in Melbourne, while Sydney house prices rose less than the city’s rate of inflation.

Supply is catching up to housing demand, slowing Australia’s once-rapid real estate price growth.Credit: Louie Douvis

Data released on Monday by CoreLogic shows the median house value nationally lifted 0.5 per cent in August, which will soothe concerns within the Reserve Bank about inflation and ward off rate-rise pressures.

In the nation’s second-largest market, Melbourne, values dropped by a further 0.2 per cent to be down by 1.5 per cent over the past three months and by 1.4 per cent since the start of the year. Melbourne’s median house value is $929,715 – $37,000 lower than Brisbane’s. A year ago, Melbourne’s median house value was almost $97,000 above Brisbane.

But those falls come after years of sharp price increases that have made housing affordability a critical election fight, with the Greens promising a new agency called the National Renters Protection Authority to enforce a rent freeze and police tenancy disputes.

The Greens’ proposed agency could dish out $4000 on-the-spot fines to landlords deemed to have breached new eviction policies or wrongly withheld bonds, while repeat-offending landlords would be fined nearly $16,000 and real estate agents $78,000.

The party that may hold the balance of power after the next election would require state-based laws because the Commonwealth does not have constitutional power over rents, but it ups the stakes in its fight with the federal government which has raised rent assistance by $10 a week and cut international students as some of the levers it is using to take pressure off house prices.

“Unlimited rent increases should be illegal. Unliveable rentals should be illegal,” Greens leader Adam Bandt said, referring to creating minimum standards for things such as heating and cooling.

“Labor and the Liberals think they can tinker around the edges with a fundamentally broken housing system, but renters will punish them at the ballot box.”

The Greens’ measures are likely to lead to criticism that removing stock from the market would further tighten supply at a time when more homes are needed to lower prices.

Unlike the Greens’ $2.5 billion offer to the states to enforce a short-term freeze and long-term cap on rent rises, the Coalition’s assistant spokesman for housing affordability, Andrew Bragg, said governments could “hit the states hard” by potentially withholding GST or other federal funding to encourage the states to build more homes.

“NIMBY-ism is poison for young people, and when you see councils and states block developments, particularly apartment buildings, that is a disaster for young people,” Bragg told the ABC on Sunday.

Under the GST deal put in place by the Howard government, all proceeds of the tax must flow to the states and territories.

The Coalition’s housing package, expected in the next few months, will expand a Scott Morrison-era pledge to open up superannuation for housing, and Bragg said new supply-side measures were being looked at, pointing to a New Zealand policy linking construction to funding.

Any move to tie GST to specific state policies would likely be fiercely opposed by those governments and require contentious federal laws.

Prime Minister Anthony Albanese used Bragg’s comments to claim the Coalition’s plan would hurt voters, as he made a visit to Western Australia – a key state in next year’s federal election.

“Now we know that WA is at risk ... along with all other states being subject to threats by [the Coalition] to make cuts to the GST and hit the states hard where it hurts. That means less funds for education and health and infrastructure,” Albanese said.

Newly appointed Housing Minister Clare O’Neil vowed last month to find new ways to boost the supply of housing and curb the soaring cost of construction in a sign of how fiercely contested housing policy will be in the lead-up to the next federal election.

Inflation data last week showed a slowdown in growth in rents, which eased slightly to a still-elevated 6.9 per cent over the past year.

Nationally, CoreLogic’s measure of rents was unchanged for a second consecutive month, with annual values at their lowest growth rate since May 2021.

CoreLogic’s head of research, Eliza Owen, said a slip in net-overseas migration and a lift in investor activity was helping balance supply and demand for rentals.

The slowdown in Melbourne was likely affected by state tax policies as well as a run-up in supply.

“Supply is also a big factor for Victoria, where the state saw more dwelling completions over the past decade than any other state or territory,” Owen said.

While Melbourne lost residents during the depth of the COVID pandemic, it has since become the fastest-growing capital. It added more than 167,000 residents during the 2022-23 financial year compared with Sydney’s 147,000.

Victorian Treasurer Tim Pallas attacked Bragg’s comments on withholding GST funding as “divisive politics”, while state shadow treasurer Brad Rowswell called for cuts to state property taxes, which had risen to the highest in the nation.

Sydney’s median house value rose 0.3 per cent last month to $1,471,882. But over the year, Sydney’s median value has climbed by 3.6 per cent, lower than the city’s inflation rate of 3.8 per cent.

Across units and houses, values in capital cities rose 0.5 per cent in August to be up 1.3 per cent over the past three months. In the same quarter last year, values lifted 3.1 per cent.

While the Reserve Bank does not target house price values through its interest rate settings, it does watch for the so-called “wealth effect” of higher value encouraging people to increase spending.

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