Highlights

  • RBA Governor Michele Bullock told Senate Estimates that housing prices remain around 50% above early 2020 levels.
  • Cotality's index fell for a sixth straight month in September, leaving national values 5.2% below the March 2026 peak.
  • Enacted changes from 1 July 2027 limit negative gearing to new builds and replace the 50% CGT discount.
  • Draft legislation proposes a 30 June 2027 cost base reset, using either a formal valuation or an apportionment method.

Before the pandemic, housing cost far less than it does now. On Wednesday 28 October 2026, after six straight monthly falls, RBA Governor Michele Bullock reminded senators that prices are still around 50% higher than in early 2020. For anyone who bought back then, that gap is a large paper gain, and how it is taxed hinges on reforms beginning 1 July 2027.

What Bullock said

Speaking at Senate Estimates on 28 October, the same day the ABS reported 4.3% annual inflation, Bullock said: "Housing prices are around 50% higher than they were in early 2020."

Housing is also feeding inflation: the ABS named it the largest contributor to annual CPI, up 5.2%. Treasury Secretary Jenny Wilkinson told Estimates that government spending is not the main driver. The reading suggests the central bank sees recent falls as a partial unwinding of a large rise, not a reason to hold off on rate rises.

The downturn in numbers

Cotality reports national values fell 1.1% in September and 3.7% over the quarter, while staying unchanged over the year. The national median is $899,236.

Cities diverge sharply. Over the year to September, Sydney fell 7.0% and Melbourne 6.2%, while Perth rose 10.1% and Darwin 11.9%. A fall of about 5% does not undo a rise of about 50%, and that is the gap Bullock pointed to.

A 2020 purchase, worked through

Hypothetical: an investor bought an established property in early 2020 for $700,000. Rising in line with Bullock's figure, it would now be worth about $1,050,000, a paper gain of about $350,000, before costs such as stamp duty.

Sold today after more than 12 months by an Australian resident individual, the 50% CGT discount would generally apply, leaving about $175,000 of the gain in taxable income. Because the investor held the property before the 12 May 2026 evening cut-off, its negative gearing is protected under the enacted changes.

The tax changes that are law

The ATO says the property measures "are now law" under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026, starting 1 July 2027. Negative gearing narrows to new builds, and the 50% CGT discount is replaced by indexation plus a 30% minimum tax for individuals, trusts and partnerships.

For an investor like the one above, splitting pre-2027 and post-2027 gains is the key issue. August draft legislation proposed a cost base reset at 30 June 2027. Investors could pay for a formal valuation or use an apportionment method that assumes even growth over the ownership period.

If most growth happened before 30 June 2027, as it might for a 2020 purchase, a formal valuation may preserve more of the gain under the 50% discount method. CPA Australia has asked what valuation evidence the ATO will accept. These rules are proposed, not yet law.

Treasury's forecasts back in focus

Treasury's housing modelling has been under scrutiny since the May Budget, amid claims it underestimated the effect of tax changes on property and rents. The Budget papers estimated 35,000 fewer dwellings over a decade, about 0.25% of the housing stock, alongside 75,000 more owner-occupiers, which Finance Minister Katy Gallagher described as a net 30,000 more homes. At a 4 June hearing, Wilkinson said rents would be about $2 a week higher because of the changes alone.

Liberal Senator Andrew Bragg argued at Estimates that the changes would reduce housing supply, including through self-managed super funds.

What to watch

Cotality's October index and the start of the RBA board meeting fall on Monday 2 November. The rate decision follows on Tuesday 3 November, and the Senate committee reports on 13 November on the bill amending the negative gearing and CGT rules.