Australia’s peak property industry group has unveiled a plan to improve housing affordability, championing low-deposit loans for first home buyers, but warns against “playing with” negative gearing.

The Property Council of Australia’s 10-point blueprint, released less than two weeks out from the federal budget, talks about reducing construction costs, boosting supply and removing barriers to downsizing.

But it urges against pursuing changes to negative gearing or any other measures that purport to help with affordability but instead “act as a tax” on investment and supply.

“Negative gearing and the capital gains tax discount are essential components of the private rental market, as well as rational tax policy,” says its report released on Wednesday.

“Retention of negative gearing – and carefully canvassing any changes to the capital gains discount – are essential to the continual supply of rental accommodation.”

After weeks of speculation over what the budget might bring to ease housing affordability pressures, Malcolm Turnbull has attempted to tone down expectations despite a red-hot property market in Sydney and Melbourne.

A poll released on Monday found voters agreeing with the prime minister about housing affordability, saying while it’s an important issue, it isn’t necessarily a top priority.

The Property Council says costly regulations, poor planning decisions and excessive taxes across all levels of government have created a logjam for the past 20 years.

“Australia is benefiting from population growth, record low interest rates and relative economic prosperity, but getting so many other policy settings wrong has made affordability worse,” its chief executive Ken Morrison said.

Dwelling prices have climbed to 6.9 times the average wage and it takes 139 per cent of an average household’s annual income to pay the deposit on an average house.

“This affordability cauldron has taken years to develop and it will take concerted effort over many years to unwind,” Mr Morrison said.

The Property Council wants to investigate low-deposit loans for first home buyers based on their rental and work histories, as well as a rethink on downsizing rules that discourage pensioners from budging.

However, it points out 1.2 million rental properties are negatively geared and argues the tax breaks underpin the market.

“Housing is a $6 trillion asset class and government must tread carefully, otherwise it runs the risk of undermining the flow of jobs and investment through the economy,” Mr Morrison said.

“Too much of the housing affordability debate has misdiagnosed the problems, focused on measures that won’t do anything to fix affordability, or set out to blame scapegoats for political convenience.”

The Property Council also wants to see institutional investment in “build to rent” housing, densities developed around transport hubs and corridors, and the abolition of stamp duty.

– AAP