The property market is experiencing a slowdown, with a perfect storm of factors causing a chill in buyer confidence. Interest rates, tax reforms, and global economic uncertainty have all contributed to a hesitant market, with buyers taking a step back and waiting for the dust to settle. This is particularly evident in the first-time buyer market, where young investors like Joshua Goodfellow are re-evaluating their strategies due to the recent changes in negative gearing and capital gains tax (CGT) rules. The impact of these changes is already being felt, with a noticeable drop in auction clearance rates and a decline in investor mortgage applications.
The real estate market is in a state of flux, with existing sellers facing a buyer's strike. Ray White chief economist Nerida Conisbee notes a significant weakening in buyer demand, with fewer active bidders and a softening of open-home attendance. This shift in sentiment is causing buyers to become more price-sensitive and reassess their borrowing capacity, especially those who were already stretched financially. The removal of negative gearing and the introduction of inflation indexing for the 50% CGT discount are expected to reduce the borrowing capacity of investors by 10-20%, leading to a pause in investment activity.
The market is now in a period of recalibration, with buyers and investors taking a step back to understand the long-term implications of the changes. This pause is not just about the tax reforms; it's also about the impact of higher interest rates and global economic uncertainty. The housing market downturn is likely to persist until these factors are resolved, with a potential for slower price growth and weaker transactions throughout 2026.
However, this slowdown presents an opportunity for those who are financially ready. When sentiment weakens, buyers generally have more negotiating power, and sellers become more realistic. This could be a good time for buyers to secure a property without the intense pressure seen during stronger market periods. But it's a delicate balance, as a shrinking investment pool could exacerbate the rental supply issue, making it harder for renters in the long run.
