Federal parliament on Tuesday is set to debate changes which would limit negative gearing to new properties from July 2027, while replacing the 50 per cent capital gains tax discount with a rate based on inflation.
After the first data released since the May budget showed property prices falling in major capital cities, Treasurer Jim Chalmers said the market had already been experiencing a downturn in price.
"We had seen the housing market already softening a bit before the budget. The budget decisions, the tax reforms in the budget are not the only factor when it comes to the housing market," he told ABC Radio.
"What we want to see is ... first homebuyers getting a fair chance at auctions, and so we're seeing that increasingly."
Dwelling values fell 0.9 per cent in Sydney and 0.8 per cent in Melbourne during May, according to data from research agency Cotality.
Auction clearance rates have also experienced a downturn in the weekends following the May budget, which Dr Chalmers said had also been softer before it.
He said Treasury had forecast house prices would continue to increase but slower than previous rates.
"Our job here is not to target a particular price outcome, our job here is to make sure that there are more affordable options for first homebuyers to get a toehold in at what has been historically a really difficult market," Dr Chalmers said.
It comes as the latest figures from the Australian Bureau of Statistics showed the total number of dwellings approved in April fell by 3.4 per cent.
The fall was driven by a 3.6 per cent drop in the amount of private dwellings being approved, not including houses, after it declined by 25.7 per cent the month before.
The bureau's head of construction statistics Daniel Rossi said the number of dwellings being approved was still 10.2 per cent higher year-on-year.
"Private sector house approvals fell one per cent, but remain at elevated levels," he said.
"This is the third consecutive month with over 10,000 private sector houses approved. The last time this occurred was during the final three months of 2021."
NSW was largely behind the fall in private sector houses being approved, dropping by 132.8 per cent in the month.
It followed the previous month which had the highest house approval levels in almost four years.
However, South Australia increased by 11.4 per cent and Victoria by 2.2 per cent in the same time period.
