Australia’s property markets enter recalibration phase as buyer confidence falls post-budget, PIPA report finds

Australia’s property markets are diverging sharply across state lines, with buyer sentiment cooling following the Federal Budget and borrowing capacity contracting for investors, according to the latest PIPA National Market Update.

The report, which draws on insights from PIPA members and market experts published in the PIPA Adviser e-magazine, paints a picture of a national market transitioning from momentum-driven growth to a more selective, strategy-led environment.

PIPA Chair Cate Bakos said the cycle had shifted decisively.

“The cycle is shifting from momentum-driven growth to selective and strategy-led opportunities,” Ms Bakos said.

“Overall, the national market is cooling, but fundamentals such as infrastructure, affordability, and rental demand continue to underpin long-term resilience.”

New South Wales

Sydney has moved into a clear cyclical downswing, with auction clearance rates falling below 50 per cent for the first time since 2020 and premium suburbs absorbing discounts of up to 10 per cent.

Victor Kumar, Director of Right Property Group, said the shift in market depth was striking.

“Investor activity has retreated sharply. Inspection numbers have thinned across the board, and properties that would have attracted 30 to 40 groups only a couple of months ago are now seeing fewer than five attendees. This is a meaningful change in market depth and reflects a more cautious, and credit-sensitive buyer pool,” Mr Kumar said.

A two-tier market has emerged, with the Northern Beaches and Mosman experiencing noticeable discounting while the Inner West, Central Coast and Bowral continue to hold firm. Industrial assets in Western Sydney are bucking the residential trend, with micro-industrial units near the Badgerys Creek Airport corridor generating yields of around seven per cent.

“Despite the short-term slowdown, the long-term fundamentals remain intact. Chronic housing undersupply, population growth and the once-in-a-century development of Sydney’s new airport city continue to underpin future demand,” Mr Kumar said.

Victoria

In Victoria, the Federal Budget’s proposed changes to negative gearing have driven a structural shift in investor behaviour, with buyers pivoting away from established Melbourne houses toward regional centres and boutique apartments.

Joey D’Agata, Head of Strategy at Gameplans, said the impact on borrowing capacity had been material.

“Someone who could previously secure finance at $900,000 may now find their ceiling closer to $650,000 to $700,000. This isn’t just a psychological shift, it’s now a structural one, and it’s reshaping purchasing decisions across the board,” Mr D’Agata said.

Regional centres including Bendigo, Ballarat and parts of Gippsland are attracting growing investor interest, with yields regularly sitting in the four to 4.5 per cent range. Meanwhile, boutique Melbourne apartments — particularly in low-density blocks outside the CBD — are seeing renewed demand, with rental yields frequently starting above five per cent.

“The appeal is twofold. First, reduced borrowing capacity is pushing some investors into lower price points where apartments are the only viable option. Second, and more importantly, the yield profile is compelling. Rental yields in the apartment segment regularly start with a five, and in some cases exceed six per cent, figures that are difficult to ignore when cash flow has become the primary investment lens,” Mr D’Agata said.

Granny flat additions are also gaining traction following planning law changes that expanded eligibility to larger residential blocks, providing investors with a tool to neutralise negative cash flow positions.

Queensland

Queensland remains active but increasingly segmented, with Greater Brisbane’s affordability constraints pushing demand into the unit sector while regional hubs emerge as the standout yield plays.

Tim Graham, Director of Hotspotting, said asset selection had become more critical than at any point in recent years.

“Greater Brisbane is no longer a market where investors can buy almost anywhere and expect the same result. Asset selection, rental demand and price discipline matter more than they did two years ago,” Mr Graham said.

Rockhampton has emerged as the state’s standout regional performer, with house yields of approximately five per cent and unit yields of around 5.37 per cent, supported by low vacancies and a strengthening Central Queensland economy. Toowoomba and Bundaberg are also attracting attention, underpinned by major infrastructure investment including the $2 billion Toowoomba Hospital and the $2 billion Bundaberg Hospital respectively.

Inner Brisbane remains compelling for apartment investors given its employment nodes, lifestyle amenity and infrastructure improvements tied to Cross River Rail and the Olympic precinct.

“Overall, Queensland’s fundamentals remain strong, but the market is becoming more selective. The best opportunities are likely to be found where affordability, yield, tight rental conditions, infrastructure and economic diversity intersect,” Mr Graham said.

Western Australia

Perth recorded monthly growth of 0.7 per cent in June 2026 according to the Cotality Home Value Index — one of only a handful of capitals to post a positive result as the national index fell 0.4 per cent, its largest single-month decline since December 2022. Annual growth sits at 23.9 per cent, with Perth’s median house price of $1,093,000 now exceeding Melbourne’s $948,482.

However, conditions are normalising. Listings across Perth are up 34.5 per cent year-on-year, days on market have nearly doubled since February, and REIWA data shows three in 10 Perth houses are now selling below listing price, compared to just one in 10 earlier this year. Where discounts are being applied, they average 7.5 per cent.

Matthew Hughes, CEO of CPA Group, said a number of converging forces had driven the shift, including three consecutive rate rises since the start of 2026, geopolitical uncertainty tied to the conflict in Iran, and the post-Budget drop in investor enquiry.

“The fundamentals underpinning Perth remain sound, and I want to be clear: there is still genuine value in this market and still growth ahead. What we are entering is not a downturn — it is a transition,” Mr Hughes said.

“The extraordinary boom-time growth of the past four years is coming to an end, and Perth is moving into a phase of more sustainable, moderate growth that will, in time, begin to taper further as the market finds its natural equilibrium.”

The proposed R-Code overhaul — which would reduce the minimum lot size for subdivision from 900 square metres to 700 square metres in R20 zones — has the potential to unlock value for an estimated 50,000 additional Perth homeowners.

South Australia

Adelaide’s long-running boom has softened sharply since the Federal Budget, with auction clearance rates declining and open inspection attendances dropping almost immediately after the budget night announcements on 12 May.

Peter Koulizos, known as The Property Professor, said the market reaction had been swift.

“The property market hit a brick wall on 12th May, which was Federal Budget night. The proposed changes to Capital Gains Tax and negative gearing created a lot of angst in the market. The reaction of the market was so quick that the very next weekend, it was obvious that this had spooked the market. Auction clearance rates decreased and numbers of people at open inspections and auctions also dropped,” Mr Koulizos said.

Days on market are increasing, vendor discounting is rising and some agents — particularly those who entered the industry during the boom years — are exiting the profession. Inexperienced developers are also under pressure, with those who purchased recently unable to rely on the 10 to 15 per cent price appreciation that had previously underpinned their feasibility assumptions.

Despite the slowdown, Mr Koulizos said a crash remained unlikely given the strength of the labour market.

“The unemployment rate is very low and most people who want a job either has one or can easily find one. This is not like the recession in the 1990s where interest rates and unemployment were in the double digits,” he said.

He warned renters to prepare for further cost pressures as existing investors sell to first home buyers and potential investors are deterred by the CGT and negative gearing changes. He predicted the softening would last at least two years.

Tasmania

Tasmania delivered one of the stronger regional performances nationally over the 2025/26 financial year, with Launceston recording annual house price growth of 10.6 per cent to a median of approximately $628,000, and the North West market surging 18.9 per cent to around $576,500.

Sam Spilsbury, Director of Buyers Agents Tasmania, said investor activity had improved noticeably throughout the year, driven by the state’s rental supply shortage and historically low vacancy rates.

“These markets continue to attract buyers seeking affordability, lifestyle benefits and stronger rental returns than are typically available in larger mainland cities,” Mr Spilsbury said.

Hobart recorded median house prices of approximately $746,000 and annual growth of around eight to nine per cent. Buyer sensitivity to price remains elevated, with turnkey properties attracting the strongest competition and overpriced listings spending longer on market.

ACT

The ACT market has broken out of an extended stalemate, with transaction activity returning after a prolonged standoff between vendor expectations and buyer capacity. Cotality data from May found Canberra dwelling values still sitting 1.4 per cent below the record highs of May 2022, with annual growth of 5.6 per cent in the 12 months to April 2026.

Claire Corby, Principal Buyers’ Agent at Capital Buyers Agency, said two major policy changes would shape the market in the year ahead.

“The most significant story for the year ahead is supply. For the first time in Canberra’s history, subdivision is now permitted in residential areas. The ACT Government’s ‘missing middle’ reforms represent a significant shift in a city serviced by 99-year leasehold titles since its creation over 100 years ago,” Ms Corby said.

The ACT Government has also announced the complete removal of stamp duty for first home buyers regardless of purchase price or income levels, a measure expected to stimulate demand at the entry level of the market from 1 July. The benefit extends to individuals who have not owned property in the past five years, eligible pensioners and NDIS participants.

Ms Corby cautioned, however, that property owners faced rising holding costs as the ACT Government’s debt climbed beyond $12 billion, with rates increases of up to 13 per cent announced in the most recent budget.

“While stamp duty cuts may be a crowd pleaser, the longer-term costs and debt repayments appear to fall to the shoulders of property owners via consistent increases to rates and land tax,” Ms Corby said.