Weaker house prices in Sydney and Melbourne are “healthy for the economy”, Treasurer Josh Frydenberg says.
House prices have fallen 2.7 per cent nationally since peaking 12 months ago, new data has revealed.
“What we have seen is the prices come back to a more sustainable level,” Mr Frydenberg told reporters in Sydney on Tuesday.
“This is healthy for the economy. This is what the Reserve Bank had wanted.”
CoreLogic data released on Monday showed softer house prices in Sydney and Melbourne have continued to drag down the national market.
Prices dropped by 0.5 per cent nationally in September, marking 12 months of falls.
Prime Minister Scott Morrison said it is a welcome soft landing, considering prices have been “running very hot” in Sydney and Melbourne.
“It was in those markets that it was really driving up the increased level of debt,” he told reporters in Perth on Tuesday.
Mr Morrison said the soft landing was a result of changes driven by the government, and carried out by the Australian Prudential Regulation Authority, such as tightening interest-only loans.
Looking ahead, the treasurer said the coalition will need to be careful when implementing the recommendations of the banking royal commission to ensure Australians can continue to access credit in a way that doesn’t harm the economy.
Both he and the prime minister have jumped on the latest data to suggest Labor’s plans to remove negative gearing and increase capital gains tax on housing would lower house prices.
“The prospect of a Labor government will have serious consequences for the savings and the biggest asset that most if not all Australians own, their home,” Mr Morrison said.
Opposition MP Brendan O’Connor said the plans, which Labor took to the last election, are still needed to ensure housing affordability.
“We will see falls and rises in the housing market, but the fact is we need to have sensible policy,” he told Sky News on Tuesday.
“What we need to do is to provide opportunities for home-buyers, often who are on reasonable incomes, not being able to compete against speculators who get tax breaks to buy their tenth investment home.”