The numbers coming out of the property market this month are pulling in opposite directions, and that tends to cause a lot of confusion. Values are slipping in some cities. Rents are still rising nationally. And a significant tax reform just passed into law. Understanding how those three things interact is more useful than reacting to any one of them alone.
What the Current Data Actually Shows
On the price side, conditions have softened. The national Home Value Index dropped 0.4% in June 2026, the sharpest month-on-month fall recorded since December 2022. The RBA raised the cash rate three times in 2026, in February, March and May, taking it from 3.60% to 4.35%, with all four major banks passing on the full increases. The Board then held rates steady at 4.35% in June. That rate environment has reduced borrowing capacity and cooled buyer confidence in the larger capitals.
The picture varies considerably by city. Sydney and Melbourne are genuinely falling, and borrowing capacity has been meaningfully cut by this year's rate rises. Perth, Brisbane, and key regional markets remain more resilient than Sydney and Melbourne.
On the rental side, the story is different. Australia's national residential vacancy rate was 1.2% in May 2026, with all capital cities recording vacancy rates below 2%. Perth (0.6%), Adelaide (0.7%), and Brisbane (0.8%) are among the tightest capital markets in the country, according to SQM Research data. A balanced rental market is typically described as having a vacancy rate between 2.5% and 3.5%. Below 1.0% is classed as an acute shortage. Most capitals are well below the balanced range.
Rental market conditions remain tight despite an easing in migration-based population growth, with national rental listings reportedly about 11% lower in Q4 2025 than a year prior and 17% down on the previous five-year average.
The rental vacancy rate and the sales market are not the same thing. One measures how hard it is to find a tenant. The other measures how hard it is to find a buyer. Right now, they are pointing in different directions.
The Tax Changes Every New Investor Needs to Know
This is where first-time investors need to pay close attention, because the rules changed materially in the May 2026 Federal Budget and the legislation is now law.
Negative gearing on established property: On 12 May 2026, as part of the 2026-27 Federal Budget, the Government announced reforms to negative gearing and capital gains tax arrangements, and these measures are now law. From 1 July 2027, negative gearing will be limited to new builds to focus tax support on new supply. Existing arrangements remain unchanged for all properties held before Budget night. Investors who buy established housing after Budget night will still be able to deduct losses against residential property income, but they will be able to carry forward unused losses to future years rather than deduct them against other income like wages.
Capital gains tax: The Government will replace the 50% CGT discount with a discount based on inflation and introduce a minimum 30% tax on gains from 1 July 2027. Properties held at the announcement time (7:30pm AEST 12 May 2026) will be exempt from the negative gearing changes, while the CGT reforms will only apply to gains that accrue after 1 July 2027.
The new-build distinction: Investors in new residential dwellings benefit from continued ability to negatively gear the investment, and on disposal they may choose between applying the 50% CGT discount or the new indexation-plus-minimum-tax regime. At this stage, the CGT discount for superannuation funds is not expected to be changed.
These are material differences depending on whether you buy established or new. The detail is complex, and how it interacts with your income level and holding period is something to work through with a registered tax agent or financial adviser, not to assume.
A Scenario to Illustrate the Trade-offs
Consider two investors, each buying in mid-2026.
Investor A buys an established property after Budget night for $750,000. From 1 July 2027, any net rental losses can be carried forward and offset only against future rental income, not against wages. If the property is held for many years and sold post-2027, the CGT calculation will apply the old 50% discount only to gains accrued before 1 July 2027, with the new indexation and 30% minimum tax applying to gains accrued after that date.
Investor B buys a new build for $750,000, also in mid-2026. Negative gearing deductions against wages remain available from 1 July 2027. On eventual sale, Investor B can choose which CGT treatment applies, potentially retaining the 50% discount.
Neither scenario is inherently better. Entry price, location, rental yield, cash flow, and time horizon all matter. The point is that the tax calculation is no longer the same for both.
On the rental income side, an independent rental appraisal before purchase is essential. Nationwide rental inflation, as measured by the annual change in the rents component of the CPI, was reported by the ABS at 3.9% in January 2026, down from 5.8% a year prior, suggesting that while rents remain elevated, the pace of growth is moderating. Vacancy conditions vary significantly by suburb and dwelling type, so a suburb-level check is more useful than a national average.
What to Do Before You Buy
The current environment rewards preparation more than speed. Here are three concrete starting points.
Get your finance position clear first. Borrowing capacity has shifted with each rate move this year. A licensed mortgage broker can give you a current serviceability assessment based on actual lender criteria, not estimates. If you are building, ask about construction-period payment structures, including options like EWC's HomePay product, which offers zero monthly payments for the first 12 months during the build before standard repayments begin.
Get proper tax advice before you sign anything. The negative gearing and CGT rules now differ depending on whether the property is new or established and when you contracted to buy. A registered tax agent or financial adviser with investment property experience can model how the post-2027 rules affect your specific income situation. This is not something to piece together from general articles.
Do a property-level due diligence, not just a market-level one. National data tells you the direction. Suburb-level vacancy rates, recent comparable rental appraisals, and local supply pipelines tell you whether a specific address makes sense. Population growth is still strong, Australia is still not building enough homes, and household wealth continues to rise even while sentiment is weak, but those national factors play out very differently across different markets.
For a broader look at what EWC does across sourcing, finance coordination, and new build products, see our services page. If you want to talk through your specific situation, book a free call or visit our insights page for further reading.
General information only, not personal financial advice. Speak with a licensed adviser before acting.