Highlights

  • In his view, many buyers simply do not understand what the tax changes mean for them yet.
  • The institute's sentiment index came in at 4.3 out of 10 for the three months to 30 September.
  • Victoria, New South Wales and Queensland all scored below 5, with Victoria the lowest at 3.7.
  • Asked what worried buyers most, respondents ranked higher interest rates first, inflation second and "the rollback of investor tax concessions" third.

A survey of 384 property experts expects prices to fall 8–11% from their March peak. The institute's research head says unclear communication of the negative gearing and CGT changes is keeping buyers out of the market. The survey's research head is pointing less at interest rates and more at uncertainty.

Why confusion over the tax changes is being blamed

Chan blamed the slow communication of the Budget changes by the Labor Government. He said a recovery could begin around July 2027, could come sooner if buyers understood the changes, or could slip into 2028. Cotality's October home value index provides a benchmark. National values were down 5.2% from the March 2026 peak at the end of September, and the combined capitals were down 6.4%. Sydney has fallen further, down 8.6% from its February 2026 peak. The national median value was $899,236 at 30 September. If the API's range is applied to Cotality's national figures, which measure the market in a different way to the API survey, values may have already covered roughly half to two-thirds of the total fall. Hypothetical example: This uses Cotality's national median and assumes the API's percentages apply to the same index. Working back from the 5.2% decline already recorded, the implied March peak is about $948,561 ($899,236 divided by 0.948). An 8% fall from that peak would leave the median near $872,676, a further drop of about $26,560, or roughly 3%, from the September level. An 11% fall would leave it near $844,219, a further drop of about $55,017, or roughly 6.1%. These figures are illustrative and are not forecasts for any particular home or city. On those assumptions, a buyer paying the September median would face a further paper loss of between about $26,560 and $55,017 if the survey's range proves right, before any recovery.

What the tax changes actually do, and what is still unsettled

Part of the confusion is that the changes sit at different stages of the law-making process. The capital gains tax changes, which also start on 1 July 2027, have also been legislated. For most assets they replace the 50% discount with indexation for gains accruing from that date and add a 30% minimum tax on capital gains. This is a minimum tax, not a discount. What has not been settled is the legal definition of a "new build". The ATO notes it was always left to later law. On Wednesday the Treasurer delivered the second reading speech for the Treasury Laws Amendment (Tax Reform No. One schedule legislates a definition of "new residential dwelling" and exemptions from the negative gearing limits for affordable and public housing and other purposes. "These reforms are about removing the distortions that have locked too many young Australians out of housing for too long," the Treasurer said. The speech did not give a start date for the new-dwelling definition. The earlier exposure draft applied it from the 2027–28 income year, but the bill still has to pass Parliament.