Will Housing Prices Rebound After Tax Changes? (Q&A Guide)
Q1: What is happening to Australia’s housing market right now?
Australia’s housing market is expected to slow down in the short term. Property prices are forecast to remain mostly flat through 2026 as recent tax changes and softer buyer activity take effect.
According to Commonwealth Bank (CBA) senior economist Trent Saunders, the market has already started reacting, with:
- Lower auction clearance rates
- Homes taking longer to sell
- Fewer property transactions
Q2: What caused this slowdown?
The main reason is the change to negative gearing and capital gains tax (CGT) policies.
These changes have:
- Reduced incentives for property investors
- Increased holding costs for investors
- Made some buyers more cautious
As a result, the existing slowdown in the housing market has accelerated.
Q3: How much will prices be affected?
CBA estimates that housing prices may end up just under 5% lower than they otherwise would have been due to these tax changes.
However, this is described as a modest adjustment, not a major downturn.
Q4: Will the market stay weak for long?
No. The current weakness is expected to be temporary.
Economists predict that:
- The slowdown will ease by late 2026
- The market will begin recovering in 2027
Q5: Why is a recovery expected in 2027?
Several key factors are expected to drive the rebound:
1. Lower interest rates
The Reserve Bank of Australia (RBA) is expected to begin cutting the cash rate in 2027, likely around May and August. Lower rates reduce borrowing costs, making it easier to buy property.
2. Housing shortage
Australia continues to face a chronic undersupply of housing, which keeps pressure on prices over time.
3. Strong demand
Demand is expected to stay strong due to:
- Population growth
- First-home buyers entering the market
- Returning investors
4. Improved affordability
Slightly lower prices may actually help:
- More buyers qualify for loans
- Rental yields improve, attracting investors back
Q6: How will investors be affected?
Investors are likely to feel the biggest impact in the short term because:
- Negative gearing has traditionally helped offset losses
- Tax changes reduce some of these benefits
- Some investors may exit or pause investing
This is expected to lead to weaker lending activity in the near term.
Q7: Will these tax changes permanently change the market?
No. According to CBA, the long-term impact is limited.
The tax changes are expected to cause:
- A one-off price adjustment, not a long-term decline
- A return to normal growth patterns after the reset
In other words, once the market adjusts, it should continue growing similarly to before.
Q8: What does this mean for buyers and sellers?
For buyers:
- You may find better opportunities in 2026
- Less competition and slightly lower prices
- Improved affordability over time
For sellers:
- Expect a slower, more cautious market in the short term
- Potentially stronger conditions returning in 2027
Conclusion
While tax changes such as adjustments to negative gearing and capital gains tax have created short-term uncertainty, the overall outlook for Australia’s housing market remains positive.
The slowdown expected through 2026 is likely to be temporary. Strong fundamentals—including housing undersupply, population growth, and expected interest rate cuts—are set to support a recovery in 2027.
In simple terms:
The market may pause, but it is not stopping—it is resetting before the next growth cycle.