The Budget’s tax changes have spooked the housing market – but could the same slump be quietly fuelling a stock market rally and a boost to your super?
A question has been raised that has come out of the surprise Budget tax changes that have spooked the housing market and led to forecasts of price falls of 10% or more. And here it is: Could the house price slump be a winner for stock prices and by definition, our super funds?
If the answer is yes, then Treasurer Jim Chalmers’ mates in the union/industry super fund sector will one day talk about a silver lining in the black cloud the 2026-27 Budget was for exiting homeowners.
And over time, if my experts on last night’s SWITZER investing TV program are right, the house prices will stop falling and slower rises will resume. Those experts included legendary real estate agent John McGrath, prolific property author and TV personality Margaret Lomas of destiny.com.au and one of the country’s best analysts of house prices in cities and regions, Simon Pressley of propertyology.com.au. You can check out their views at https://switzer.com.au/the-switzer-show-should-you-buy-property-after-the-big-budget-blowout-is-the-healthcare-stock-rotation-finally-here-6-july-2026/.
While that’s one group’s longer-term view, for the more immediate effects of the Budget on property, stock market analysts have a positive story to report linked to the Treasurer’s and Prime Minister Albanese’s assault on most Australian property owners.
By the way, this isn’t me playing politics. It’s me being an economist and reporting that a colleague’s mate sold his house on the upper North Shore after the Budget and saw his price fall from offers of $4.2 million in December last year to a sale price of $3.5 million!
Of course, this isn’t all Budget-driven, as three rate rises and the Iran war’s impact on petrol prices really mean we’ve faced four rate rises on our hip pockets.
But it raises this question: did the Treasurer consider the state of the economy when he took a sledgehammer to the housing sector?
Back to my main story with the AFR reporting the following: “Research house Morningstar analysed the five housing market downturns since 1980 where national dwelling prices fell by at least 5 per cent, and excluding the global financial crisis in 2008, it found the S&P/ASX 200 Index climbed about 7.5 per cent on average during each housing slump.”
I hope these guys are right, as I’ve positioned my financial planning clients for a comeback in the local stock market, helped by an expected solid performance from the US stock market.
Here are the main points put forward by Morningstar’s market strategist Lochlan Halloway in a report to clients, with a point or two added by me:
- Academic studies support the view of house prices down, stock prices up.
- The relationship is more likely with a mild house price fall rather than a GFC-style collapse.
- House prices did fall 0.4% across June, while the ASX 200 did climb 0.5% but this is too early days to claim that rise was due to Jim and his taxing Budget.
- In the short term, local bank share prices could fall because a weakening housing sector will eventually hurt bank loans and profits.
- For the above not to hurt the ASX 200 index and super funds, there’ll need to be a rotation into other stocks. We’ve seen a bit of that with healthcare stocks up solidly in the past month, and some tech stocks have looked a little healthier.
- Short sellers have risked $11 billion trying to short the banks and that means they’re betting bank stocks will fall.
- Because the capital gains tax changes also hit shares, the history of house prices down and stock prices up could be out-of-date. But experts think stock picking might suffer because investors fear the tax slug from picking big growth stocks. They think passive ETFs will be more in favour, but that’s guesswork.
On this final point, I suspect most investors will grin and bear the new tax implications and historically, finance educators like me would always say that tax shouldn’t be the main driver of investing and business decisions. The profitability and returns of the investment should come first.
That said, anyone who wants to get richer investing in stocks, should do it through a self-managed super fund (SMSF) because it’s taxed more lightly. But here’s the catch: you won’t get to take the money out until you retire! That said, not touching your money and letting it roll over time is a great way to get rich!
While I think stocks will have a better year, the history of house prices down and stock prices up could be changed because of the tax changes. That said, given you can still use negative gearing to buy shares, there could be a drift towards shares from disaffected property investors and those people who never knew you could borrow and get tax deductions for taking a punt on shares!
