Hi,

Domain’s preliminary clearance rate is sitting at 59% across 614 reported auctions, with 364 properties sold at auction, 83 withdrawn and 167 passed in. In comparison, the previous week’s preliminary clearance rate was 56%, with the final clearance rate coming in at 52% — the weakest result we have seen since 2022–2023. By comparison, the clearance rate for the same weekend last year was 70%.

Last week was a huge week for the Australian property market — although not for the right reasons — with the federal government announcing major proposed tax reforms, including limiting negative gearing to new builds and abolishing the 50% capital gains tax discount. The changes still need to be legislated, with draft legislation expected later this year.

During the federal election campaign, the government repeatedly stated that it would not make changes to negative gearing or capital gains tax. However, the Budget announcements have now confirmed significant changes, with the biggest one being the removal of negative gearing on established properties for purchases made after 7:30pm on 12 May 2026.

Importantly, the proposed changes are expected to be grandfathered, meaning existing investment properties should not be affected.

The government argues that the current tax system favours wealth built through property rather than income earned through work, that younger Australians are being locked out of home ownership, and that Australia’s housing crisis is worsening. While there is no doubt affordability is a major issue, this has been a problem for many years and certainly has not suddenly appeared since last year’s election.

The proposed negative gearing changes will likely make things harder for first-home buyers rather than easier. While the government believes the reforms may help slow future property price growth, they are not expected to significantly reduce property prices or solve the underlying affordability and housing supply issues.

The biggest issue we have is simple — we do not have enough homes. Australia’s population is growing faster than we are building properties, and that imbalance is what is driving much of the pressure in the market. Strong immigration has played a major role in this, not property investors.

Investors also play an important role in providing rental accommodation for people who cannot yet afford to buy. If investors are discouraged from purchasing established properties, future rental supply could tighten even further, which will place additional pressure on rents. First-home buyers are already dealing with rising interest rates and reduced borrowing capacity. If rents continue to increase as well, it becomes even harder to save for a deposit.

Another factor is that, because the legislation is expected to be grandfathered, it may not lead to an increase in established housing supply for first-home buyers anytime soon. In fact, many investors may choose to hold onto their existing properties if rental demand and rents continue rising strongly.

There is also growing discussion around homeowners retaining their current home as an investment property and then purchasing a new principal place of residence, which could further reduce the future supply of established homes available to buyers.

As a parent of young children, of course I would love to see future generations have a better opportunity to purchase property. However, I do not believe changing negative gearing is the answer. We need to increase housing supply and ensure population growth is occurring at a pace that our housing, infrastructure and services can realistically keep up with.

Interestingly, 48,000 permanent residents have accessed the federal government’s 5% deposit scheme since ‘permanent residents’ became eligible in 2023, representing around 20% of all users of the scheme since it began. How is this meant to help younger Australians purchase property?

Australia absolutely needs immigration and skilled workers, but migration levels need to remain balanced with our ability to deliver enough housing and infrastructure to support that growth sustainably.

Have a great week.

Kim Easterbrook – Managing Director