The myth of housing prices and the CGT discount

Every good trick is inherently the same. The performer makes you watch the right hand while the left hand does the actual work. In magic, misdirection is how the coin vanishes into the sleeve under your nose. In politics, it is how your pocket gets picked while you're still dizzy from the spin.

As part of the 2026 budget, the Albanese government has announced the abolition of negative gearing and the replacement of the 50 per cent capital gains tax discount with the pre-1999 inflation indexing model. This tax grab has been framed as a solution to intergenerational inequity. Young Australians cannot buy homes, the story runs, because the tax system favours older investors who can. Tweak the settings, level the field, and the kids get a fair go.

It is a tidy narrative. It is also nonsense.

Start with the diagnosis. The causality between the 1999 capital gains tax change and the housing affordability crisis is weak. Declining housing affordability is a global phenomenon. The United States, Canada, the United Kingdom and much of Europe are all experiencing the same issues. While several of those jurisdictions have forms of negative gearing, none implemented a capital gains tax change in 1999.

What, then, has actually driven housing asset prices higher in Australia? Many things, but start with immigration.