Key Highlights

  • The RBA's November Statement on Monetary Policy cites higher interest rates for falling home prices.
  • The May budget's CGT and negative gearing changes are also named as factors.
  • The RBA does not say which Factor matters more.
  • Home prices are almost 5% below their March peak.

The Reserve Bank has put on the record what many property owners suspected. In its November Statement on Monetary Policy, released alongside Tuesday's rise in the cash rate to 4.85%, the RBA said home prices had slid to almost 5% below their March peak, and it named two causes: higher interest rates and the tax changes announced in the May federal budget. That matters now for owners and investors facing new CGT and negative gearing rules.

What the RBA actually said

The key passage in the Statement's overview is short. "Housing prices in September were almost 5 per cent below their March peak," the RBA wrote, "reflecting higher interest rates and tax changes announced in the federal budget."

It also said "housing prices have declined and new housing lending has fallen sharply", and that "housing market conditions have eased further".

The overview does not rank the two causes or put a number on how much of the fall each one explains. It simply lists them side by side.

The Board's own decision statement on 3 November took a similar line on prices without mentioning tax. It said "housing prices have fallen significantly" and that "falls in housing prices and turnover are expected to weigh on growth in dwelling Investment and household consumption".

The tax changes the RBA is pointing to

The budget measures referred to are now law. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026) received assent in June.

It makes two big changes for property owners:

  • The 50% CGT discount is replaced by cost-base indexation plus a 30% minimum tax for gains accruing from 1 July 2027. Gains that built up before that date keep the old treatment.
  • Negative gearing is limited to new builds for residential property bought after 7:30pm AEST on 12 May 2026, applying from 1 July 2027. Existing holdings are grandfathered.

Neither change has started to bite on tax returns yet. But both were announced in May, only weeks after prices peaked, and markets tend to move on announcements rather than start dates.

A separate package, the Tax Reform No. 3 Bill 2026 and a companion bill imposing a 30% minimum tax on discretionary trusts, passed the House on 29 October and is before the Senate. Those are bills, not law, and the RBA's statement does not refer to them.

Rates are doing the heavy lifting too

The RBA lifted the cash rate by 25 basis points to 4.85% on 3 November, a six to three vote. Three members preferred to hold at 4.60%.

The Statement's forecasts assume the cash rate averages 4.9% in 2026–27, based on market pricing as at 28 October. The RBA said "a softer housing market and a higher assumed path for the cash rate" than in August are expected to constrain growth.

The RBA now forecasts GDP growth of 1.6% over the year to December 2026, easing to 1.3% by December 2027. It expects the Unemployment rate to rise to 4.9% by late 2027 and 5.1% by December 2028.

Inflation remains the concern. CPI Inflation is forecast at 4.5% in the year to December 2026, falling to 2.7% a year later. Trimmed mean inflation is forecast at 3.6% and 2.9% over the same periods.

Private data points the same way as the RBA. the Home Value index for October showed national values down 1.2% in the month, a seventh consecutive fall, with a national median dwelling value of $884,855.

Hypothetical example: what 'almost 5%' looks like

Hypothetical example: Mia owns a house in a Capital city that was worth $900,000 at the March peak.

A fall of 5% would take its value to $855,000, a paper loss of $45,000. Because the RBA said "almost" 5%, the true fall for an average home is slightly smaller, and individual properties vary widely.

Now assume Mia also owns an established investment unit she bought before 12 May 2026. Under the enacted rules it stays grandfathered for negative gearing, so a net rental loss can still be set against her wages.

If she had bought the same established unit in June 2026, after the cut-off, the limit on negative gearing would apply from 1 July 2027. A $15,000 net rental loss that would have cut her tax by $4,800 at a 30% marginal rate plus the 2% Medicare levy would no longer offset her salary in the same way.

That difference in after-tax cost is one reason analysts link the budget measures to weaker investor demand. The figures here are illustrative only and are not a prediction of any market.

Why this matters for timing and valuations

For the CGT changes, the value of an asset at 1 July 2027 will matter when splitting a gain between the old and new rules. The ATO has said a valuation for that date cannot be forward-looking, so getting one now would not capture the value on the day.

A softer market heading into that date could mean lower recorded values for some owners. That would shift more of any future gain into the period covered by indexation and the 30% minimum tax. Whether that helps or hurts depends on each owner's circumstances, Holding Period and later sale price.

For investors considering established property, the after-tax numbers have changed since May. Anyone in that position may want to get independent tax advice that reflects their own situation.

What to watch / key dates

  • 5–6 November 2026: Senate Economics Legislation Committee hearings on the Tax Reform No. 3 Bill and the discretionary trusts minimum tax bill.
  • 13 November 2026: committee report due.
  • 28 November 2026: Victorian state election, with property taxes a campaign issue.
  • December 2026: the federal mid-year budget update (MYEFO), date not yet published.
  • Early December: the next monthly Home Value Index, a test of whether the slide continues after the latest rate rise.
  • February 2027: the RBA's next Statement on Monetary Policy and updated housing commentary.
  • 1 July 2027: the new CGT rules and the negative gearing limit start to apply.

The RBA's wording does not settle the debate over how much of the slide is due to tax and how much to rates. It does confirm that the Central Bank sees both at work, and that it expects a softer housing market to weigh on growth into 2027.