A top economist has predicted tax-free owner-occupied homes will be the 'biggest winner' from the Federal Budget, as Australians push their money there in the wake of the Albanese government's planned capital gains tax and negative gearing changes. 

Christopher Joye, a highly regarded economist and founder of Coolabah Capital Investments, forecast that investors will plough their money into their own homes instead of investment properties, stocks and shares. 

Budget leaks suggest the Albanese government will axe the negative gearing tax break tomorrow evening. 

Currently, investors who lose more money on a property - through repairs, strata payments or similar - than the rent they receive from it can offset the loss against their salary or other income.

Under the proposed new rules, only newly-built properties will still benefit from the tax break, which the government hopes will increase housing supply. 

The government is also poised to reform capital gains tax (CGT) where Australian residents who own an asset for more than 12 months only have to pay tax on 50 per cent of the profit, for example, if an investment property is sold.

The system is expected to return to pre-1999 rules which adjusted gains for inflation rather than applying a flat discount. 

An Australian Financial Review report on Monday suggested that there will also be a one-year grace period before the rules take strict effect.

In a social media post on X, Mr Joye predicted the CGT change will see investors pull their money out of 'businesses, shares, commercial property and rental housing' to funnel it into owner-occupied homes, spiking prices even higher.

'It's a great way to push up the prices of these houses,' he said. 

And he warned that both the CGT and negative gearing changes will make investing in rentals unattractive. 

'It will give Australia the most unattractive capital gains tax in the world,' he added. 

'The government's policies will 1) push up owner-occupied house prices, 2) push up rents and 3) reduce the capital available for investing in any small, medium or large sized business.

'Your best bet will be to buy a house, live in it - and hope they keep dropping 500,000 new people into the country every year to pump up prices.' 

Albanese earlier defended his U-turn on his 2025 election vow not to change negative gearing and CGT policy on Monday.

Before the last election, Albanese snapped when he was asked whether he would touch either of the contentious housing policies - denying he would: 'Yes! How hard is it? For the 50th time.' 

But on ABC Radio National on Monday, Albanese had changed his tune, saying his government will 'respond to the circumstances that are here and now when it comes to intergenerational equity'. 

Pressed on what exactly had changed since his government ruled out touching negative gearing, Albanese said the lack of progress in housing affordability had prompted a rethink.

'How they are different is that they continue to be entrenched without reform, and that's the point,' he said.

Albanese said the situation in housing had not sufficiently improved in the previous 12 months.  

'For a long period of time, young people have tried to save for a home,' he said. 'Another year has passed since the election, and not enough has changed.

'So many people have had another year of missing out at auctions, of renting and paying someone else's mortgage, and too many young people are close to giving up on the opportunity of owning their own home.' 

The full details of the changes are yet to be released. The Australian Financial Review reported that there will be a one-year grace period for both the negative gearing and CGT changes.

Any property acquired from Budget night onwards will be subjected to the negative gearing change. However, the policy will not come into full effect until July 1, 2027.  Likewise, the CGT change is expected to kick in on July 1 next year.

The Opposition slammed the Albanese government over the backflip, saying housing has 'collapsed' under their watch. 

Opposition housing spokesman Andrew Bragg said the government's Housing Australia Future Fund, part of $80billion in spending, had delivered less housing than when the Coalition was in office. 

'Over the course of these four years, they have only built, on average, 170,000 houses,' he said.

'Under the last Coalition government, there were 200,000 houses being built every year on average.

'So the government has spent $80billion of taxpayer funds to build 30,000 fewer houses each year.'

He accused the government of driving up housing costs for younger Australians through policy settings, including the uncapped 5 per cent deposit scheme, which has widely been criticised for lifting demand and increasing house prices. 

He added: 'They have collapsed supply, and meanwhile they have really made things ugly for younger Australians by pump priming house prices at the entry level with their ridiculous non-means tested 5 per cent deposit scheme.'