The May 2026 Market Watch delivered one of the most significant discussions we’ve had in years, because this month wasn’t just about property price movements. It was about the 2026 Federal Budget which has fundamentally shifted the way Australians will approach property ownership, investing, tax planning and long-term wealth creation in the months ahead.
Joining Debra Beck-Mewing and Scott Hochgesang for this special episode was Brandon Perry from BJ Perry Accountants, who helped review the major budget changes and what they could mean for buyers, investors, upgraders and families over the coming years. While the market data itself still provided some important insights, it was clear throughout the discussion that the Budget announcements have now become one of the biggest influences on future property decision-making.
Property market performance to 30 April 2026
Across the major capitals, Sydney and Melbourne continued to show weakness through April. Sydney recorded declines across all three major data sources, while Melbourne also softened, reflecting the continued pressure of higher interest rates and affordability constraints. Debra noted that while broad segments of these markets are slowing, there’s still individual pockets performing strongly depending on local demand and property type.
Brisbane and Adelaide continued to show resilience, although the data sources are increasingly showing mixed results depending on whether they are measuring settled sales or asking prices. Brisbane still recorded positive annual growth overall, while Adelaide continued to ‘chug along’ steadily despite affordability pressures. Perth remained the standout performer nationally, continuing its exceptionally strong growth run and again outperforming most other capitals.
One important reminder raised during the discussion was that while some annual growth curves are beginning to soften, this does not necessarily mean prices are falling everywhere. In many markets, prices are still increasing, just at a slower rate than before.
Rental markets remain extremely tight
Rental growth remains one of the strongest ongoing themes across Australia, with low vacancy rates continuing to push rents higher in many capital cities and regional areas. Darwin, Hobart, Perth and Brisbane all recorded strong rental growth, while Sydney rents also continued rising. Scott noted that there’s still very little good news for renters nationally, with supply shortages continuing to place pressure on affordability.
The continued strength in rental demand also reinforces an important point for investors. Even with the tax changes now proposed, well-positioned properties in strong rental markets are still likely to remain attractive over the longer term, particularly where rental yields help offset holding costs.
Market factors influencing the property market
Outside of the Budget itself, several major factors continue to shape market conditions. Interest rates remain front and centre, with the RBA increasing rates again on 5 May 2026 and futures markets still pricing in the possibility of additional increases later this year. Inflation concerns remain elevated, particularly following spending measures outlined in the Federal Budget.
The team also discussed the Victorian State Budget, ongoing global instability and how quickly the media cycle shifted away from interest rates once the Budget announcements dominated headlines. While many buyers may have felt exhausted by the constant flow of speculation and changing forecasts, the consensus was that buyers and investors can now focus less on media noise and more on reviewing their own individual strategy carefully.
Federal Budget 2026 – the major property changes
The INFOCUS segment of this month’s Market Watch was the Federal Budget and its major proposed changes affecting property investors and wealth structures. Brandon Perry outlined three major areas that could significantly impact buyers and investors from July 2027 onward.
Capital Gains Tax changes
The government announced plans to remove the current 50% Capital Gains Tax discount and replace it with an indexation-based system. Existing arrangements will continue until 1 July 2027, giving investors a transition window before the new structure applies.
Negative gearing restricted to new builds
One of the biggest changes announced was the proposal to restrict negative gearing benefits to new properties only from 1 July 2027. Existing investment properties purchased before the announcement will continue to be grandfathered under the current rules, but future buyers of established investment properties may no longer be able to offset rental losses in the same way.
Changes to discretionary trusts
The budget also proposed a 30% tax on trust distributions at the trustee level. While this may not heavily impact beneficiaries already paying higher tax rates, it could significantly affect families currently using discretionary trusts to distribute income to lower-income beneficiaries such as university-aged children.
What could this mean for buyers and investors?
One of the strongest themes throughout the episode was that buyers should avoid reacting emotionally or rushing into decisions. Instead, the team emphasised the importance of reviewing personal goals and current financial positions, borrowing capacity, retirement planning and future goals in light of the proposed changes.
For existing investors, there was some relief that many current holdings are expected to remain grandfathered under the existing rules. However, future investment decisions may become far more strategic, particularly when deciding between established property, new builds, self-managed super funds or alternative structures.
The team discussed the implications for each key group including first time buyers, current owners, upgraders, downsizers, and rent-vestors. After considering the changes, it’s clear that solid strategies that could be actioned before the Budget announcement can still be achieved though with a slightly different approach.
There will definitely be some wins for first time buyers, but also long term hold strategies such as purchasing an older property with a view to building town houses or duplexes will work better in the new regime.
In an interesting pivot, new strategies are emerging that comply with the Budget changes – one of which is turning homes into investment properties as these would retain the pre-Budget treatments, then purchase another property to live in as the home base or just rent.
The discussion also highlighted that new-build markets may receive a major surge in demand because of the continued access to negative gearing benefits. However, Scott warned buyers to be extremely careful in the new-build space and to avoid poor-quality investment stock that may only appeal to investors rather than future owner occupiers.
For first-home buyers, the changes may create both opportunities and challenges. Reduced investor competition in some established markets could ease price pressure in certain locations, particularly in higher-priced segments of Sydney and Melbourne. However, competition for affordable homes under $1 million is still expected to remain strong.
At a high level, suburbs with properties that are extensively cash negative (where the rental return is low) will come under price pressure and could experience drops of around 10%, while suburbs with properties that are cash positive (where the rental return is high) will continue to increase in value until the rental return becomes negative.
A more strategic market moving forward
A major takeaway from this month’s discussion was that the property market has not become ‘bad’ or ‘unworkable’. Instead, it has become more strategic and more nuanced. The right buying approach pre-Budget may now be completely wrong post-Budget depending on each person’s goals, tax position, income structure, borrowing capacity and long-term plans.
The team also noted these changes may not necessarily remain permanent. There is already discussion about whether future governments may amend or reverse aspects of the reforms depending on their impact on housing supply, affordability and market activity.
Final thoughts
The May 2026 Market Watch was less about short-term price movements and more about understanding how dramatically the buying landscape may change over the next few years. While many buyers and investors will understandably feel uncertain, the discussion repeatedly reinforced one key point: now is the time for careful planning, tailored advice and structured decision-making, not rushed action.
As always, the team encouraged buyers to focus on trusted information sources, avoid hype-driven decisions, and make sure any property strategy is tailored to their own long-term position rather than simply following what others are doing.
With changes announced in the Budget, it will be important for people who want to buy property in the next few months to make sure your search strategy is tuned to the market changes. If you’re actively searching or about to embark on your search, book in for the next session of the Property Smart Start workshops here.
Author: Debra Beck-Mewing
Debra Beck-Mewing is the Editor of Property Portfolio Magazine and CEO of The Property Frontline. With over 20 years of experience buying property across Australia, Debra is a skilled property strategist and buyers agent known for uncovering tailored opportunities — from family homes to multi-use investments.
She has deep expertise in advanced strategies including renovations, granny flats, sub-division, and development. A Qualified Property Investment Advisor (QPIA®), licensed real estate agent, and holder of a Bachelor of Commerce and Master of Business, Debra combines strategic insight with hands-on experience.
Debra is the creator of the Property Smart Track System™ – a professional property buying system that enables buyers to select, assess and buy property independently in today’s market. She also leads Buy Like A Genius™, a premium end-to-end buyers’ agency service for busy professionals seeking expert property acquisition without the stress.
As a passionate advocate for greater transparency in the property and wealth industries, Debra is a sought-after speaker, author, podcast host, and participates on numerous committees including the Property Owners’ Association.
