Australia's Sydney and Melbourne house prices expected to fall by up to $100k due to tax reforms and rate hikes
Consensus Summary
Australia’s Sydney and Melbourne house prices are projected to fall by up to 8% over the next 12 months, with median values potentially dropping by $100,000 in Sydney and $75,000 in Melbourne, according to economists and bank forecasts. The decline is attributed to the federal government’s tax reforms—restricting negative gearing to new builds and returning to pre-1999 capital gains tax rules—combined with three Reserve Bank interest rate hikes since February. The auction clearance rate hit a six-year low of 47.4%, signaling a slowing market. While NAB predicts a 2% nationwide decline in 2026 followed by a 2% rebound in 2027, Westpac expects flat prices nationally with localized drops in Sydney and Melbourne. Polling shows 54% of Australians support lower house prices, though political parties remain divided on solutions, with the government focusing on tax reforms and the opposition emphasizing lower interest rates and higher incomes. Economists suggest the decline is a market rebalancing after pandemic-driven price surges, rather than a sign of broader economic weakness.
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Key details reported by multiple sources:
- House prices in Sydney and Melbourne are expected to fall by up to 8% over the next 12 months, with Sydney potentially dropping 6-7% and Melbourne 4-7%.
- A 7% drop in Sydney would wipe around $100,000 from the median house value, while a similar drop in Melbourne would cut the median price by about $75,000.
- The federal government’s tax reforms include restricting negative gearing to new builds from mid-2027 and returning to pre-1999 capital gains tax concessions.
- The national preliminary auction clearance rate fell to 47.4% last week, the lowest since late April 2020, with 10 of the past 12 weeks below 60%.
- NAB forecasts a 6% drop in Sydney and 7% in Melbourne, with a 2% nationwide decline in 2026, followed by a 2% nationwide increase in 2027.
- Westpac predicts flat nationwide prices in 2026, with Sydney down 3% and Melbourne down 4%.
- AMP forecasts a 5% nationwide decline over the next 12 months, calling it within the range of previous property corrections.
- Median house prices in Sydney fell by $75,000 and in Melbourne by $42,000 in the March quarter of 2026, before the budget measures were announced.
- A poll by SMH/The Age showed 54% of respondents support lower house prices, 11% oppose, and 35% are unsure or neutral.
- Prime Minister Anthony Albanese defended the government’s housing reforms, stating they aim to address a system prioritizing investors over first-home buyers.
- Opposition Leader Angus Taylor accused the government of an 'Olympic-level backflip' over expanded CGT carve-outs for small and innovative businesses.
- The Greens are expected to support the tax legislation but are negotiating a one-month delay to the National Disability Insurance Scheme overhaul.
Points of Difference
Details reported by only one source:
- Social Services Minister Tanya Plibersek stated house prices had grown too quickly, with Australia having one of the most expensive property markets in the world.
- Shadow Treasurer Tim Wilson said he wanted incomes to rise on the lowest tax levels to make housing more affordable, noting 'everybody wants house prices to be lower until they’ve bought their first home, then they want them to go up.'
- Diana Mousina (AMP) noted Australian property prices are up over 50% since early in the pandemic, with households carrying more debt and higher interest repayments as a share of income than almost every other major economy.
Contradictions
Conflicting information between sources:
- The articles are identical in content and do not contain any contradictions.
Source Articles
House price fall could slice $100,000 from your home’s value
Economists believed house prices were going to fall even before the budget’s tax changes. Now there’s a price tag on those falls – up to $100,000.
House price fall could slice $100,000 from your home’s value
Economists believed house prices were going to fall even before the budget’s tax changes. Now there’s a price tag on those falls – up to $100,000.