August 2026
Welcome to State of the Market, our monthly roundup of key property market updates, with actionable insights for small and medium-sized property developers.
Key takeaways:
The housing downturn worsens
Economists warn of further rate rises
34,000 Aussies could slip into negative equity
Australia’s inflation and housing policies are at loggerheads
Banks still reduce interest rates despite investor fears
The housing downturn worsens
The Home Value Index fell 0.7 per cent, for its largest decline since December 2022. Sydney and Melbourne led declines, falling 1.4 per cent and 1.2 per cent respectively, but the downturn has spread to almost all of Australia’s other capital cities with the exception of Melbourne.
Gerard Burg, Vitality Head of Research, said:
“These revisions highlight the rapid evolution in the market, particularly across the mid-sized capitals…Perth in particular has seen significant shifts, with June growth revised 120 basis points lower in our latest update, which pulled the once-booming city into negative territory for that month.”
Source: Cotality
What this means for SME developers: A broadening housing downturn is likely to weigh on buyer confidence and pre-sales, making careful site selection, conservative feasibility assumptions and reliable access to development finance increasingly important for SME developers.
34,000 Aussies could slip into negative equity
Over 34,000 Australians face the threat of falling into negative equity, as a result of the slump in housing prices that has already brought property values down by $230 billion.
Data released by the Coalition opposition indicates this primarily includes Australians who bought homes with a 5 per cent deposit, which means a deposit of around $32,500 for the average purchase price of $646,000.
Morgan Stanley forecasts that the market could fall by as much as 10 per cent, which would reduce the value of the average first-home by $65,000 – a decline twice the amount of the original deposit.
Source: News.com.au
What this means for SME developers:
Developers may face slower pre-sales as first-home buyers become more cautious and lenders tighten credit, increasing the importance of affordability, competitive pricing and disciplined project planning.
Economists warn of further rate rises
Despite the recent release of benign inflation figures, a slew of Australia’s top economists expect the RBA to implement another rate cut before the end of the year.
Analysts from Citi, UBS, AMP, Bank of Queensland, Rabobank, Barrenjoey, Deloitte, KPMG and Judo Bank expect the RBA’s next decision to be for a hike to interest rates, given that inflation still remains above the target band.
Source: AFR
What this means for SME developers: Further interest rate rises would increase borrowing costs for both developers and buyers, potentially dampening demand, slowing pre-sales and putting additional pressure on project feasibility and margins.
Australia’s inflation and housing policies are at loggerheads
Nerida Conisbee, Chief Economist at Ray White, points out that Australia’s efforts to tame inflation via higher interest rates run contrary to its goal of improving home affordability.
The increased cost of borrowing does not reduce construction costs and will only make development more expensive.
Conisbee further points out that the controversial changes to the Federal Budget already appear to be dampening investor demand, which in combination with higher development costs will further constrain new home development.
Source: Linkedin
What this means for SME developers:
For SME developers, the conflicting policy settings reinforce the need for flexible, non-bank funding solutions, as higher borrowing costs and weaker investor demand make traditional development finance and project feasibility increasingly challenging.
Banks still reduce interest rates as RBA potentially tightens
Despite the fall in investor confidence and the RBA’s hawkishness, Rob Flux, educator and mentor at The Property Developer Network, expects developers to see a bunch of great buying opportunities at reasonable costs.
A key reason for this is that the banks are lowering interest rates independently of the RBA”s monetary policy, because the property slump has left them with a scarcity of mortgage borrowers.
“They’re hunting for business, so they’re dropping their long-term fixed interest rates independently of the RBA, which is almost unheard of,” Flux. “The banks are hungry for business.”
Source: The Property Developer Network
What this means for SME developers:
There could be great opportunities to negotiate really strong terms given that vendors want their previous price points, allowing developers to improve their cash flows and profitability.
NSW moves to make the numbers stack up
The NSW Productivity and Equality Commission has put development feasibility at the centre of the housing debate. Its review of housing supply challenges found that across much of Sydney the sale price of a new apartment no longer covers what it costs and risks to build, so developers are pausing projects until the numbers stack up. Research by Urbis found that 75 per cent of apartments approved in metropolitan Sydney since 2020 have not progressed to construction.
The Commission’s recommendations aim to lift feasibility rather than lean on subsidies. They include rapidly removing barriers to density in the most feasible locations, such as height limits and maximum floor-space ratios, streamlining the approval process and resolving bottlenecks that hold up projects even after a development application is approved, and making infrastructure contributions simpler and more predictable. The NSW Government has begun acting on this agenda, including density bonuses in well-located areas and funding in the state budget to modernise building approvals.
The timing matters. These changes are landing just as construction costs keep climbing and end sale prices soften, which is the exact squeeze that makes so many projects unfeasible in the first place.
Source: NSW Productivity and Equality Commission
What this means for SME developers:
Planning reform that targets feasibility is welcome, but reform takes time to flow through while the cost and price pressures are here now. The projects that get away in this market will be the ones with realistic feasibilities and finance that can move at the pace of the opportunity.
David Ingram, CrowdProperty Australia CEO, comments:
“It is good to see the NSW Productivity and Equality Commission naming the real problem, which is feasibility. You can rezone a site and approve a building, but nothing gets built if the numbers do not work. With construction costs rising and sale prices sliding at the same time, the margin for error has never been thinner. Reform will help over time, but developers need well-structured projects and reliable funding to get shovels in the ground now. NSW Government needs to look at the guarantees “
David Ingram, CrowdProperty Australia CEO, comments:
“SME developers are navigating a challenging environment of sliding home prices, weaker investor confidence and RBA rate hikes making disciplined project selection and dependable access to funding more important than ever. Although market conditions remain difficult, developers with well-structured projects and flexible finance solutions will be best placed to continue delivering the housing that Australia needs.”
CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.
Opinions or views expressed represent the thoughts of individuals and not those of CrowdProperty or Quay.
July 2026
Is the housing slump creating buying opportunities?
June saw the downturn in Australia’s housing market further deepen, with Cotality’s national Home Value Index falling 0.4 percent in month-on-month terms, for the largest decline since December 2022.
The disparity in home price growth rates across the capital cities was once again apparent, highlighting the increasingly fragmented character of the Australian housing market.
The smaller capital cities still managed to eke out gains in home prices, with Darwin seeing a 1.4 percent increase and Perth a 0.7 percent rise. Brisbane home prices also remained buoyant, edging up 0.3 percent.
Both of Australia’s largest cities saw home prices slide, with Sydney posting a 1.2 percent decline and Melbourne falling 1.0%.
Source: Cotality
Tax changes and rate hikes
Rob Flux, founder of Property Developer Network, said recent changes to capital gains taxes alongside the Reserve Bank of Australia’s (RBA) continued hawkish stance were the key drivers of weakness in the Australian housing market.
“The combination of budget impacts and recent interest rate hikes has resulted in a softening of the markets in Sydney and Melbourne in particular.
“While the rest of the country is still in positive territory, growth has slowed significantly”
June marked the third RBA interest hike this year in response to inflationary pressure heightened by the conflict in the Strait of Hormuz. These three hikes have collectively lifted the RBA’s cash rate target from 3.6 percent to 4.35 percent, with the monetary authority signalling the possibility of further increases.
Source: RBA
The RBA also highlighted the adverse effect of the federal government’s landmark budget tax reforms on housing prices.
“Conditions in the established housing market had softened and housing credit growth looked set to slow in the period ahead,” the RBA said in its June statement.
Clearance rates slump
A further sign of weakness in the Australian property market can be found in its extremely low clearance rates, which fell below the 50 percent threshold nationwide through the second half of June, and for a third consecutive week at the start of July.
Clearance rates across Australia dropped to around 43 percent by the end of June, well below the decade average of roughly 65 percent.
David Ingram, CEO of CrowdProperty Australia, highlighted the data as a concerning sign for future housing price trends.
“The persistently low level of clearance rates bodes poorly for the market moving forward,” Ingram said.
“Potential buyers are holding off on entering the market, due to expectations of further declines in dwelling prices.”
Opportunities for developers
Despite the negative sentiment surrounding housing prices as a result of Australia’s macroeconomic policy environment, Rob Flux still sees reason for SME developers to be hopeful.
This is because the budget changes will favour demand for new build properties, as part of efforts to incentivise the development of new housing stock.
“There will be a huge number of buying opportunities coming into the market, with less competition, given investors are no longer looking at existing stock or second-hand properties,” Flux said.
“The next 12 months will see the emergence of a two-tiered market with a huge amount of demand for brand new stock.
“That means we’re now entering a season where property development is going to be more profitable than it has been for a long period of time.”
“While much uncertainty surrounds the changes to the capital gains tax, we still expect this to be a positive shift for the developer community over the long run,” Ingram said.
“The nature of these changes should translate into a rise in demand for the types of new housing products that smaller developers are best positioned to supply.”
CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.
Opinions or views expressed represent the thoughts of individuals and not those of CrowdProperty or Quay.
June 2026
Australian home prices flatlined in May, as the Reserve Bank of Australia (RBA) extended its cycle of interest rate hikes in response to untamed inflation.
The Albanese government also introduced landmark tax changes that seek to improve home affordability by limiting the ability of investors to engage in negative gearing.
These changes, however, could create buying opportunities in the near-term while stepping up demand for new builds once they come into effect next year.
Australia home prices plateau
Nationwide home prices in Australia held stationary in May, with Cotality’s national Home Value Index coming in at 0.0%.
Australia’s two most popular cities accounted for much of the flatlining, with Sydney dwelling prices falling 0.9% in May and Melbourne’s housing market posting a 0.8% decline. Sydney is now 2.1% below its cyclical high in November of last year, while Melbourne is down 2.9%.
While other capitals continued to post gains, the impetus beneath housing prices is flagging. Perth and Darwin saw the strongest monthly growth in May with a 1.5% rise, while Brisbane and Hobart saw 0.9% increases and Adelaide rose 0.5%.
Tim Lawless, Cotality research director, said this diverging performance had been characteristic of Australia’s housing market since the pandemic.
“We are continuing to see multi-speed conditions across Australia’s housing sector, with Perth and Melbourne at opposite ends of the spectrum.”
“The past five years have seen these cities diverge sharply, with Perth values up a stunning 91.4% while Melbourne home values are only 3.3% higher since May 2021.”
Housing fundamentals remain unchanged
Key headwinds for Australia’s housing market at present include an environment of rising interest rates – following the RBA’s decision to lift the cash rate by 25 basis points to 4.35% in May.
Even more importantly, when it comes to structural trends on the Australian housing market was the latest budget, which introduced tax changes that will restrict negative gearing to new properties from July 2027.
The changes also replace Australia’s 50 per cent capital gains tax discount with a rate adjusted for inflation.
While the adjustments are intended to favour entrants to the housing market, Michael Yardney of Metropole Property Strategists argues that the budget fails to address the real cause of Australia’s housing affordability problem, which is a supply issue.
As a consequence, the underlying fundamentals of the housing market point to the persistence of upward pressure on dwelling values, as supply continues to fall short of demand.
Yardney points out that this shortfall in supply is the result of labour shortages and higher materials costs, as well as limited access to finance and land and approval delays.
The latest data from the Australian Bureau of Statistics (ABS) indicates that the total number of dwellings approved fell 3.4 per cent in April to 16,710, while private sector housing approvals fell 1.0 per cent.
The slide in housing approvals arrives despite the official launch of the National Housing Accord nearly two years ago, with the goal of remedying Australia’s home affordability crisis with the creation of one million new, well-located homes over a five-year period.
Kevin You, senior fellow at the Institute of Public Affairs (IPA), points out that the Accord has never reached its minimum monthly target, and housing approvals are now lower than they were in the middle of the pandemic.
David Ingram, CEO of CrowdProperty Australia, said this failure to build enough new builds on schedule favours long-term price gains, irrespective of tax changes.
David Ingram, CEO of CrowdProperty Australia, said the current focus on a potential correction misses the longer-term picture.
“Even a 10 per cent correction takes us back to a market we were already calling unaffordable just a few years ago,” said Ingram. “The structural imbalance between housing supply and demand has not changed. Australia has failed to approve and fund the build of enough homes to meet population growth for decades.”
Tax changes to create opportunities
Rob Flux from Property Developer Network expects the budget’s tax changes to create opportunities for developers and investors in both the short-term and long-term, despite the uncertainty created by the policy.
“For the next 12 months, investors will stay away from the market, which is going to create huge buying opportunities for anyone who is not currently in a deal,” Flux said.
“Once we get to July 2027 and the changes come into effect, I see a huge increase in demand from investors for brand new products that create additional dwellings, because those are the only things that will get the 50% capital gains tax and negative gearing.”
“First home buyers will also receive incentives for buying brand new stock, further increasing demand.”
CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.
Opinions or views expressed represent the thoughts of individuals and not those of CrowdProperty or Quay.
