Australia's home auction clearance rates have declined, investor lending has dropped, and housing market activity has slowed across major cities since mid-May 2026. These changes followed federal budget adjustments that restricted negative gearing for investors purchasing existing homes.

Since late May, fewer than half of homes listed for auction each week have successfully sold nationally, and roughly 20% of scheduled auctions are withdrawn weekly. About 40% of listed homes are now sold before auction. Cotality data indicates that property prices outside the government's 5% deposit scheme caps began to fall in April, while properties below those caps started to decline in June.

The total number of home sales in capital cities in the three months ending in June decreased by 16.2% compared to the same period last year, according to Tim Lawless, Cotality's research director. In Sydney, the top quartile of the market experienced a median price fall of approximately $90,000 within the last three months. Hobart's top quartile market also saw prices decline in the three months to June. The time homes spend on the market increased from 28 to 30 days in the year up to May.

The federal budget cut off access to negative gearing for investors buying existing homes in mid-May. Before the budget, investors accounted for approximately 40% of new home loans at major banks. Reserve Bank data showed investor lending was growing at 10.3% annually in May. Westpac reported that investor loans decreased by a fifth between the budget and mid-June, though owner-occupier demand remained steady during this period. National Australia Bank indicated that banks reduced investors' borrowing capacity by about 20%.

Equifax reported that home loan applications in May were 10.9% lower than in May 2025. First-time buyer applications were down 13.4% in May compared to May 2025. Loan Market observed a 20% fall in first home loan applications in June compared to June 2025. Brisbane buyers' agent Lauren Jones commented on the behavior of first-time buyers. "This is what first-time buyers have been waiting for … and they're just not taking the opportunity," Jones said. She added, "They freak out when the market's freaking out." Jones noted, "First time buyers are out there putting in aggressive offers when the market's hot, but the moment the market cools down, they back off."

Labor's reforms permit investors buying or constructing new dwellings to continue utilizing negative gearing. These reforms also allow investors to select between new or old capital gains tax discounts when selling new dwellings. Loan Market recorded a 31% increase in applications from investors for new homes in June compared to June 2025. New builds increased from 4.5% of Loan Market's total in 2025 to 7% in 2026.

Why It Matters

The Australian federal budget's policy changes concerning negative gearing for existing homes in mid-May 2026 have impacted the national housing market, affecting both investor behavior and overall market activity. The policy adjustments have led to a decline in auction clearance rates and a reduction in investor and first-home buyer loan applications, signaling a shift in housing market dynamics and potentially influencing property values across major cities. The distinction in policy for existing versus new dwellings indicates a governmental effort to reshape investment patterns within the real estate sector.