Australia's property market may be approaching a cyclical peak, with analysts warning of an 18-year cycle that could see prices decline. Recent data from the three weekends following Labor's budget suggests investors are pulling back after being told they will no longer be able to negatively gear newly bought established properties beyond mid-next year.
Auction clearance rates have dropped, and home prices in several capital cities have begun to fall, with some analysts predicting declines of up to 10%. Contributing factors include rising interest rates, stretched household budgets, and a pessimistic global economic outlook. However, the budget reforms are prompting a shift in investor behaviour, forcing them to evaluate properties based on rental yield and growth prospects rather than tax-enhanced speculation.
Last weekend, clearance rates across state capitals fell below 55%, the lowest since April 2020, with Sydney and Brisbane the weakest, according to Cotality data. Treasurer Jim Chalmers noted that while multiple factors are at play, making it easier for first home buyers to compete at auctions is a positive outcome.
Some first homeowners who recently purchased may worry about negative equity if prices fall further. However, Michael Fotheringham of the Australian Housing and Urban Research Institute argues that property market reforms always attract critics, but disruption is necessary to address decades of unchecked price growth and affordability issues.
