Negative gearing more than CGT discount I feel. Couple this with a property boom, increase in real incomes and easier finance. Property tends to be a long-term investment so 50% discount doesn't really figure, it is more the tax deduction that drives the buy decision, as well as alot of people prefer property over shares (most people of ethnic background I know think this way).
Problem is in Australia people actually lose money on purpose, so long as they reduce their tax. More people are actually adverse to paying tax and will do anything to avoid paying it, even though it costs them (wern't thos managed investment schems wonderful).
