Tens of thousands of dollars could be slashed from home values in all capital cities, according to Commonwealth Bank's latest housing market update.
It has reported a "faster and broader" downturn than expected, flagging a national drop of more than 10 per cent in Sydney and Melbourne through to April 2027.
Treasurer Jim Chalmers clarified the Treasury modelling showed house prices would continue to grow at a rate two per cent lower with the tax changes in mind over a number of years.
"It's appropriate to look at developments in the housing market in the same way that Australians do, which is not month to month, or week to week, or day to day," he told reporters in Canberra on Wednesday.
"Housing is a long-term investment.
"People are in a rush to reach conclusions about a Treasury assumption, which is to play out over the next couple of years, not the first couple of months."
Housing prices have slipped after Labor announced in the May budget it would remove some tax advantages for property investors.
National home values are 3.6 per cent below the market peak posted in March, according to the latest figures from Cotality.
Adding pressure on the housing market, the nation's four big lenders are forecasting another interest rate hike from the Reserve Bank before the end of 2026, after recent inflation figures came in hotter than expected.
But the treasurer maintains house prices were falling before the tax changes were announced, driven by interest rate movements and broader movements in the economy.
"There is more than one thing playing out in the housing market," he said.
Shadow treasurer Tim Wilson said the forecast goes against modelling outlined in the May budget.
"It's clear that increasingly, what they said was going to happen is not what is going to happen," he told News24.
Housing Minister Claire O'Neil downplayed concerns earlier on Wednesday, pointing to previous dips in the market.
House prices have increased by 300 per cent since the turn of the century, and Ms O'Neil said if such gains continued they would shatter aspirations for future generations.
Opposition housing spokesman Andrew Bragg isn't convinced changing the tax settings for property investments has helped first-home buyers.
"No one wants to see affordability pursued through more taxes," he told the ABC.
"Anyone who wants to dress up these terrible tax grabs as having helped anyone, I think needs a new brain."
Senator Bragg has again called for boosted housing supply to address affordability concerns.
The Commonwealth Bank report predicts house prices will begin to increase again by the start of 2028, regardless of a rate cut.
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