Tax Changes: Australia’s Property Boom Faces Sharp Downturn

SYDNEY, Aug 2, 2026 – Australia’s decades-long housing boom, which saw prices in Sydney surge more than 730 per cent over 30 years, is showing signs of reversal following the federal government’s move to curb tax breaks for property investors.

Median home prices in Sydney have climbed from A$215,000 in the mid-1990s to about A$1.8 million, making housing more than 13 times the median income. But since early 2026, prices in Sydney and Melbourne have fallen 4.5 per cent, including drops of at least 1 per cent in the past month, according to property research firm Cotality. Auction clearance rates have also plunged to their lowest levels since the Covid-19 pandemic.

Analysts say the downturn reflects a shift from “tailwinds to headwinds.” Factors such as two-income households, financial deregulation, and falling interest rates have run their course. The government’s May budget accelerated the slide by restricting negative gearing to newly built properties and announcing the removal of a 50 per cent capital gains tax discount from July 2027.

Australia’s Property Boom

While prices are down, rents continue to rise due to a national vacancy rate of just 1.6 per cent. Sydney’s median rent climbed 1.5 per cent in the past three months to A$841 per week, despite a 3 per cent fall in home prices.

Experts expect nationwide prices to fall by about 7 per cent, with Sydney and Melbourne declines possibly reaching 11 per cent. However, high migration and chronic housing shortages are likely to prevent a full-blown crash. Analysts warn that affordability gains may be temporary, as investors seek stronger returns through higher rents.

Despite the downturn, housing remains out of reach for many younger Australians, underscoring the government’s challenge in addressing intergenerational inequality.

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