An Illawarra academic says the region is experiencing its biggest falls in dwelling prices in decades, as "the market itself is making housing more affordable".
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Labor says an overhaul of negative gearing rules will begin from January 1 if it wins next month's federal election.
A Labor government will limit negative gearing concessions to new properties.
In this week's federal budget, the government had a more hands-off approach, as some economists have warned that major reworking of negative gearing concessions in the current climate could have major repercussions for the property market.
Alex Frino, Professor of Economics at the University of Wollongong said Labor's initial policy paper indicated that this was a measure designed to address the issue of affordability.
"I think that the market itself is making housing more affordable," he said.
"According to CoreLogic figures, in March dwelling prices in the Illawarra experienced their biggest monthly fall in ten years - they fell by 2.2 per cent.
"The value of the housing stock fell by that amount.
"If we look at the 12-month period, the fall from March 2018 to March 2019 was 8.5 per cent. That's the biggest annual fall we've seen in 30 years."
Therefore, Prof Frino said he believed the Illawarra market was taking care of affordability by itself.
"House prices are on their way down, and strongly," he told the Mercury.
"That's unfortunate for home owners, but good for affordability."
Prof Frino said statistics indicated that a little less than a third of Illawarra properties were rented out.
"For a house to be negatively geared it's got to be rented out, and that means that two-thirds of housing is owner-occupied and not negatively geared," he said.
"In my opinion, the data doesn't support, for the Illawarra at least, the argument that investment and negative gearing of investment properties is crowding out and driving prices up."
Prof Frino further weighed in on this week's federal budget, saying the Illawarra would benefit more than other regions from the income tax cut.
"That's because it's targeting low and middle income earners; about 100,000 people will pick up, up to $550, and over two years that's worth about $70 million," he said.
"This budget contained many small initiatives in the short-term... This was a small-spending budget, not a big-spending budget."
