Budget's Negative Gearing Changes Already Rattling Investors

Auction clearance rates have held below 50% for three straight weeks as investors pull back ahead of July 2027 negative gearing changes.

Why Investors Are Retreating From the Market

Australia's property auction results have remained under pressure, with the combined capital cities' preliminary clearance rate holding below 50% for a third consecutive week. The latest early reading came in at 49.8%, Australian Broker reports — and last week's preliminary figure of 47.3% was subsequently revised down to 45.0% on final numbers.

The city-level picture is notably uneven. Melbourne led auction volumes with 582 properties listed, posting a clearance rate of 54.5% — up 4.3 percentage points from the prior week — though this marks the sixth consecutive week the city has sat below 60%. Sydney's 562 auctions produced a clearance rate of 51.6%, recovering from the previous week's preliminary 47.3%, which was later revised to 43.1% on final counts, the city's lowest reading since April 2020.

Brisbane recorded a clearance rate of just 23.8%, its weakest result since May 2020. Adelaide fell 23 percentage points in a single week, dropping to 45.7% after a standout 68.7% the week prior.

Total auction volumes fell sharply, down 17.2% on the previous week and sitting 19% below the same period last year, with just 1,447 homes taken to auction nationally.

ABS data confirm the weakness extends beyond the auction room: new dwelling loan commitments fell 6.2% by number in the March quarter, with owner-occupier, investor, and first-home buyer commitments all declining.

AMP deputy chief economist Diana Mousina attributed the slowdown directly to policy: "The main reason is multi-fold, but most recently it's been due to concern about lower investor demand in the housing market as a result of the budget changes," she said. "The changes in the budget are another hit to the property market."

Cotality head of research Tim Lawless described the clearance rate as having "found a floor over the past three weeks, holding in the high 40% range" — a phrase suggesting the immediate pressure may be stabilising, but that sentiment remains fragile.

The rate environment is compounding investor caution. The Reserve Bank held the cash rate at 4.35% at its June meeting following three earlier increases in 2026, with the board noting that "financial conditions are now tighter than they were, and there are signs that the economy is slowing as expected." The next RBA decision is on 11 August.

What the Budget Changes Mean for Investment Properties

Two significant policy shifts are changing the investment property equation, and understanding the timeline matters for any borrower with property in their portfolio.

From July 2027, negative gearing on established properties will apply only to new builds. Investors who purchase an existing residential property after this date will no longer be able to offset rental losses against their taxable income under the current rules. For those who rely on negative gearing as part of the investment case for holding residential property, this changes the after-tax return profile materially.

Alongside this, the capital gains tax discount will be overhauled — affecting how much of the profit from a property sale is included in a taxpayer's assessable income.

Both changes are already weighing on sentiment and borrowing appetite, as Mousina's comments make clear. With July 2027 just twelve months away, the repricing of expected future returns is happening now, not on the policy commencement date.

Treasurer Jim Chalmers sought to manage expectations, telling ABC's Insiders it was "best not to overreact to data from a week or two, or even a month or two." But the structural changes are legislated, not speculative, and the timeline is fixed.

What Property Investors Should Do Before 2027

The July 2027 deadline is close enough to require planning but still allows time to act strategically. Whether you are holding existing investment property, considering a new purchase, or refinancing, there are steps worth taking now.

For existing investors, the priority is to model your portfolio's after-tax return under the new rules. In cases where rental yield growth has outpaced borrowing costs, some properties may still produce positive cash flow under the new framework. In others, the removal of negative gearing offsets changes the investment calculation fundamentally.

For those considering buying, the new-build carve-out creates a structural advantage for eligible properties — off-the-plan purchases, house-and-land packages, and newly completed stock will retain full negative gearing treatment after July 2027. That may redirect demand toward new builds at a time when softness in established property markets is creating more competitive conditions for patient buyers.

Compare current borrowing costs on our [investor home loans page](/home-loans/investor) to see what rates are available. Use our [borrowing power calculator](/calculators/borrowing-power) to model how the rate environment affects how much you can borrow, and our [refinance savings calculator](/calculators/refinance-savings) to test whether switching your current investment loan could improve your cash flow position under the new return environment.

[Australian Broker](https://www.brokernews.com.au/news/breaking-news/auction-clearance-rates-stay-soft-as-budget-changes-rattle-investors-289618.aspx) covers the full auction data and economist commentary.