Australian home prices are plunging, as interest rate hikes and tax reforms aimed at curbing residential investment have dampened the market, impacting construction demand and casting doubt on the government's plans to boost housing supply.

Australian home prices are falling as a result of interest rate hikes and tax reforms designed to curb residential investment, according to the reported headline, which also questions the government's housing-supply targets. The transmission runs through the mortgage channel: higher policy rates raise borrowing costs and reduce household borrowing capacity, while tax changes weaken the after-tax returns that have supported investor demand, slowing transaction volumes and compressing price momentum. The pressure extends to construction, where weaker sales and tighter financing feed into lower building approvals and reduced activity for developers and contractors, and to the banks, whose mortgage books are a core earnings driver and carry rising credit-quality sensitivity if arrears climb. The clearest near-term catalyst is the next monthly CoreLogic or Cotality home value index, which will show whether the declines are broadening across capital cities, alongside the Reserve Bank's next rate decision.

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