A changing market, and the case for patience
The Federal Budget has drawn considerable attention to investor demand, and the market does feel qualitatively different right now. But the most useful thing we can do at this moment is watch carefully — not draw early conclusions.
Over recent weekends, the coverage has been hard to miss: reports of softening auction clearance rates, commentary on cooling investor appetite, and a steady stream of analysis on what the proposed changes to negative gearing and capital gains tax will mean. From what I have observed firsthand, demand does appear to be affected. There are fewer buyers at home opens, and enquiry has eased.
So yes, something has shifted. But a shift in mood is not the same as a shift in fundamentals, and I think it is worth explaining why the sensible response right now is patience rather than conclusion.
Why the market feels different right now
Uncertainty almost always produces restraint. The Budget and the coverage that followed — both legitimate reporting and a good deal of social-media-driven hype and fear — are fresh in people's minds. While the direct effect of the proposed tax changes falls on investors, the secondary effect on demand for established homes could weigh on price in the short term.
Several other pressures are compounding that caution at the same moment:
- Interest rates. The cash rate now sits at 4.35 per cent following the Reserve Bank's May increase — the third rise this year. The RBA's own published forecasts assume the rate could move higher again, to around 4.7 per cent by the end of 2026, though not all economists agree; some major banks expect a period on hold. Either way, the prospect of further rises is on buyers' minds.
- Cost of living. Fuel and grocery prices continue to stretch household budgets, reducing the disposable income that underpins borrowing capacity and confidence.
- The weight of all three together. Tax uncertainty, rate pressure, and cost-of-living strain are arriving at once. It is entirely understandable that buyers feel more cautious, and I believe that is the simplest explanation for the quieter home opens and softer enquiry we are seeing.
Each of these concerns is legitimate. A decision to buy a home or an investment property should always be made carefully and with full regard to one's own circumstances. None of what follows is intended to dismiss that.
The point I want to add is one of perspective — and of timing.
Perth is not Sydney or Melbourne. It is a distinctly different market, and while it is affected by the same global forces and federal policy, it has several protective factors that should soften their impact.
What sets the Perth market apart
The national headlines are largely written about the eastern states. Western Australia's position is genuinely different, for reasons that are structural rather than sentimental.
The strongest economy in the country. WA continues to lead nationally, underpinned by a resources sector that remains robust on the back of strong commodity prices. There is little to suggest that is about to change in the near term — and it is an advantage the eastern states simply do not share to the same degree.
Population growth and the demand for housing. The net movement of people into WA has been strong, and that flow supports housing demand directly. The State Government's Build a Life in WA incentive — which offers eligible building and construction workers up to $10,000 to relocate to the state, paid in two instalments — continues to draw skilled workers and their families west. The 2026–27 State Budget extended funding for this and related workforce programs. Everyone who takes up the offer needs somewhere to live.
The tax changes are not yet law. The proposed reforms to negative gearing and capital gains tax have not passed through Parliament. The detail may still shift, and industry pressure may yet produce carve-outs or amendments before anything is settled. It is too early to treat the proposals as a finished picture.
Rental demand should support investors. With population growth continuing and supply still catching up, rental conditions are likely to remain firm — a meaningful consideration for anyone weighing the case for holding or acquiring an investment property.
A point worth understanding for investors
There is one feature of the capital gains tax proposal that I think has been under-appreciated in the coverage, and it matters a great deal to how investors might respond.
The proposed CGT changes are not confined to property. As set out in the Government's own Budget papers, the move from the 50 per cent discount to cost-base indexation and a minimum tax rate is intended to apply across capital assets generally, not residential property alone. In other words, the relative tax treatment of property versus other asset classes is not shifting as sharply as a property-only reform would imply.
Investors still need somewhere to invest. Where the change applies broadly, the incentive to move capital out of property and into another asset class is more limited than it might first appear. I would expect the net effect on property demand to be more contained than the headlines suggest. We may also see investors simply adjust the vehicle through which they invest — for instance, greater interest in holding property through self-managed super funds, which sit outside the proposed negative gearing changes. And we may see some current renters decide that buying now makes sense for them.
The case for patience
None of this is to say "nothing has changed." These are significant proposed reforms, demand has genuinely softened, and it would be naive to pretend otherwise. The market is in a different posture than it was a few months ago.
But two things are worth holding onto. The first is that we are still in the immediate aftermath — the initial reaction. Markets tend to overshoot in the first weeks of a shock and settle as the noise fades and the facts become clearer. The more telling signal will be how buyers behave once that initial reaction has calmed, and once we know what the legislation actually contains. We do not have that information yet.
The second is that, for Perth in particular, the underlying picture remains sound: a leading economy, strong population inflows, firm rental demand, and reforms that are neither finalised nor confined to property. Those are the factors that tend to put a floor under prices, and none of them has gone away.
So my view is simply this. The sensible response to a moment like this is not to react to the headlines, but to watch the fundamentals and give the market time to show its hand. As always, the right decision depends on your own circumstances. If you are weighing a move, whether as an owner-occupier or an investor, we would be glad to talk it through with you and help you read your own position clearly.
Property, considered.
If the current coverage has you reconsidering your position, a conversation costs nothing. Contact us at [email protected].
A note on sources
This commentary reflects market observations and publicly available information as at May 2026, including the Reserve Bank of Australia's May 2026 Statement on Monetary Policy, the Western Australian Government's Build a Life in WA incentive, the 2026–27 WA State Budget, and the Australian Government's Budget papers on the proposed negative gearing and capital gains tax reforms.
This article is general information and opinion only. It is not tax, financial, investment, or legal advice, and the tax measures referred to remain proposals subject to the passage of legislation. Property and investment decisions should be made with regard to your own circumstances and with appropriate professional advice.
