Westpac is now forecasting a 3 per cent drop in Sydney property prices this year as Melbourne values plunged by 4 per cent, which would cause overall capital city price growth to be flat in 2026.<\/p>\n
\u201cTax changes announced in the Federal Budget are set to drive a major shake-up with investor demand now expected to see a sharp and sustained pull-back from mid-2026,\u201d the big four bank said on Monday.<\/p>\n
\u201cWith conditions already slowing in response to rising interest rates and more rate increases still on the cards, a more pronounced correction now looms.\u201d<\/p>\n
While it\u2019s bad news for homeowners, given auction clearance rates are regarded as a leading indicator for house prices, Environment Minister Murray Watt said slowing prices nationally would help first homebuyers, as the Federal Government seeks to get its contentious Budget tax changes through the Senate.<\/p>\n
\u201cWe\u2019re not surprised to see some level of cooling in auction markets,\u201d he told the ABC on Monday.<\/p>\n
\u201cIf that makes it more possible for Australians to get into the housing market for the first time, that\u2019s a good thing.\u201d<\/p>\n
His Cabinet colleague Tanya Plibersek, who holds the Social Services portfolio, is anticipating a property market slowdown as fewer investors competed at auctions.<\/p>\n
\u201cWhat we anticipate over time is not that house prices will continue to fall but that they will grow more slowly,\u201d she told Seven\u2019s Sunrise program.<\/p>\n
\u201cHouse prices have been growing too fast and that\u2019s meant that young Australians haven\u2019t been able to afford a home of their own.<\/p>\n
\u201cPeople just can\u2019t keep up with that because they\u2019ve been competing with property investors for those houses.\u201d<\/p>\n
But Nationals leader Matt Canavan said house price falls across Australia would be a bad thing for existing homeowners.<\/p>\n
\u201cI don\u2019t want to see house prices fall across the economy, but I want to see house prices at the lower end of the market with more supply, with more affordable housing, and more affordable locations increase,\u201d he said.<\/p>\n
\u201cThat doesn\u2019t necessarily mean that people who own existing houses see their prices fall but what this Government has engineered is an economic crash – a crash in economic confidence which is seeing auction rates at record lows.\u201d<\/p>\n
With fewer homes selling above the reserve price, sales of white goods and home furnishings are expected to fall.<\/p>\n
But there are also broader effects on the economy, as homeowners feeling less wealthy reduce their spending, and state governments are forced to cut back on their spending as a result of weaker stamp duty revenue.<\/p>\n
Last weekend\u2019s figures marked only the third occasion auction clearance rates had been under 50 per cent in Cotality records going back to 2008, with the bad results including a 30 per cent clearance rate in April 2020 and 40 per cent in December 2018 following the Australian Prudential Regulation Authority\u2019s crackdown on interest-only loans.<\/p>\n
\u201cThis isn\u2019t unprecedented but certainly, it\u2019s quite rare to see clearance rates getting this low,\u201d Cotality\u2019s head of research for the Asia Pacific Tim Lawless told The Nightly.<\/p>\n
This was expected to have flow-on effects for new fridges and furniture, with fewer people needing to furnish a new home.<\/p>\n
\u201cMore broadly, you also see a downside impact like white goods, home furnishings, there is a bit of an amplifier here as you see transactional activity reduce across the market,\u201d Mr Lawless said.<\/p>\n
![\"Cotality's](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/06\/903ea445b6fd746396441c3f21b5cb726c09adb8.jpg\")
Cotality’s research director, Tim Lawless. Credit: Supplied, The Real Estate Conver<\/p>\n
\u201cRetail spending is probably going to be impacted by high inflation, by very low confidence.<\/p>\n
\u201cThe housing market certainly adds to a lack of confidence.\u201d<\/p>\n
![\"Australia\u2019s](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/06\/049915bada55935818122c790eddd71c6b3c3b3e.jpg\")
Australia\u2019s property clearance rate has dropped significantly. Credit: Susie Dodds\/AAP<\/p>\n
Falling auction clearance rate often correlate with consumer expectations of weaker property prices, AMP economist My Bui said.<\/p>\n
\u201cWe usually think of auction rates as a leading indicator for house prices,\u201d she told The Nightly.<\/p>\n
\u201cIt probably leads to lower listings on the market.\u201d<\/p>\n
Should homeowners keep their job, prolonged weakness in the housing market could see those with a mortgage feel poorer, leading to them cutting back on luxuries like overseas holidays, given weaker auction clearances are coinciding with lacklustre consumer sentiment.<\/p>\n
\u201cI do think people would cut back between now and the end of this year, but the impact is going to be a bit slow to see,\u201d Ms Bui said.<\/p>\n
Sydney\u2019s auction clearance rate has also fallen to 47.4 per cent, down from 52.8 per cent in the previous week, in a market where property prices have fallen by 1.1 per cent during the past four weeks.<\/p>\n
The level was also well below the 67.6 per cent level of a year ago when the Reserve Bank had already cut rates twice in 2025.<\/p>\n
\u201cIt implies we\u2019ll see some further downwards pressure on prices across Sydney,\u201d Mr Lawless said.<\/p>\n
\u201cSydney has a lot more exposure to investment demand, so Sydney probably has greater exposure to the pullback in investment numbers which may be playing out here as well as the affordability challenge.\u201d<\/p>\n
Melbourne\u2019s auction clearance rate of 50.6 per cent also marked a sharp dive from 57.6 per cent the previous week and 65.6 per cent a year earlier, in a market where real estate values have plunged by 0.8 per cent during the past month.<\/p>\n
Weaker auction clearances rates are more likely to affect stamp duty revenue for state governments in NSW and Victoria, considering auctions are mainly a phenomenon in Sydney and Melbourne, the two cities receiving the biggest influx of overseas migrants.<\/p>\n
Auction clearances rates have also plummeted in markets where auctions make up only a minority of sales with Brisbane\u2019s rate falling to 33.3 per cent, down from 42 per cent a week earlier and 55.6 per cent this time last year, in a market where Westpac sees 9 per cent growth this year.<\/p>\n
Adelaide\u2019s level fell to 40 per cent, down from 56.6 per cent a week earlier and 67.5 per cent during the same week in 2025, in another strong housing market where auctions are rare and Westpac is tipping 7 per cent price growth.<\/p>\n
House prices would be unlikely to rise again in Sydney and Melbourne, Australia\u2019s two biggest markets, until auction clearance rates rose above 65 per cent, Mr Lawless said.<\/p>\n
They were already falling in April before the May 12 Budget, which announced that from July 2027, negative gearing would be restricted to brand new homes as the 50 per cent capital gains tax discount was replaced with a 30 per cent tax.<\/p>\n
The Greens, who hold the balance of power in the Senate, have indicated they want grandfathering provisions for negative gearing restricted to one investment property.<\/p>\n
\u201cMost property investors, they do have one or two investment properties; for the mainstream investor, I don\u2019t think that\u2019s going to be a significant impact on the broader marketplace,\u201d Mr Lawless said.<\/p>\n
Sydney and Melbourne house values were also falling in February and March when the Reserve Bank raised interest rates, ahead of the May increase that reversed last year\u2019s relief and took the cash rate to a 15-month high of 4.35 per cent as the Iran war aggravated inflation.<\/p>\n
Australia\u2019s most expensive property market, Sydney, has a median house price above $1.5 million while Melbourne\u2019s is a shade under $1m, putting it below Brisbane, Adelaide, Perth and Canberra.<\/p>\n","protected":false},"excerpt":{"rendered":"A senior Labor Cabinet minister has hailed the worst auction clearance rates since COVID as a good thing…\n","protected":false},"author":2,"featured_media":752964,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[63,43,1625,44,84,4686,41,39,42,40],"class_list":["post-752963","post","type-post","status-publish","format-standard","has-post-thumbnail","category-headlines","tag-australia","tag-headlines","tag-lifestyle","tag-news","tag-politics","tag-property","tag-top-news","tag-top-stories","tag-topnews","tag-topstories"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/752963","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=752963"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/752963\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/752964"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=752963"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=752963"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=752963"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}