Market Trends
May 2026 Market Smart:
The Market Slowed Down.
The Budget Changed Everything.
For the first time this cycle, the national home value index recorded zero growth in May, and the Federal Budget dropped the most significant change to property tax settings in a generation. Negative gearing on established homes bought after 12 May is gone, the 50% CGT discount is being replaced, and investors who were already in the market are grandfathered.
Meanwhile Perth is still up 26% annually, rents are reaccelerating, and the data is pointing at suburbs that most investors still haven’t found. The market has shifted materially. The question is whether your portfolio is positioned for what comes next.
Key Take Aways
The budget is a bigger story than the rate cycle.
Negative gearing on established properties bought after 12 May is gone from 1 July 2027. Grandfathered investors and new build buyers are the clear winners, and the window to lock in existing tax treatment is closing.
The national pause masks a 24-point divergence.
Zero percent nationally, but Perth at plus 26%, Brisbane plus 19.7%, Darwin plus 19.6%. City selection has never been a more important variable than it is right now.
Sydney and Melbourne are offering conditions not seen since 2020.
Vendor discounts at 3.1%, clearance rates below 60% and listings above the five-year average. Prepared buyers with pre-approval have genuine leverage in both markets.
Rental yields are expanding for the first time this cycle.
National gross yield reached 3.59% in April, with vacancy at 1.7% and annual rent growth at 5.7%. The income case for well-located rental property is as strong as it has been in years.
HtAG data flags suburbs most investors haven't found yet.
Northcote units (RCS 94), Sunbury (RCS 91), Calwell ACT (RCS 91) and Wembley WA (RCS 87) remain the standouts on strong fundamentals at still-accessible price points.
Regional Australia is quietly becoming the investment story of 2026.
Rents growing 6.0% annually, vacancy at 1.9% and price points well below the capital city median. Frenchville QLD at 17.8% annual growth is the headline, but the theme is much broader.
What’s Moving and What Isn’t
The national index was flat in May, the softest result since the rate-cutting cycle began in mid-2025, dragged lower by Sydney and Melbourne which each fell 0.6% and now sit more than 1% and 2% below their respective 2025 peaks.
Outside those two cities, the picture is very different. Perth added 2.1% in April, extending its annual run to 26.0%, while Brisbane delivered 19.7%, Darwin 19.6% and Adelaide 11.4% over the year. The gap between Perth at plus 26% and Melbourne at plus 2% is the widest capital city divergence in the modern dataset, which makes city selection the single most important variable in any investment decision made right now. Regional markets are holding up well too, growing 3.1% over the March quarter against 1.1% for the combined capitals.
Cotality 2026
How Buyers and Sellers Are Feeling Now
Consumer confidence has edged up to 66.4 from the historic low of 64.1 recorded immediately after the RBA’s hike to 4.35%, though it remains near the lowest levels in 50 years of data. ANZ now expects the cash rate to hold at 4.35%, which would represent genuine stability for the first time in 18 months, and that expectation alone is beginning to shift sentiment.
In Sydney and Melbourne, auction clearance rates have stayed below 60% since mid-March, new listings are running 4.7% above the five-year average, vendor discounting has widened to 3.1%, and sales volumes are down 5.4% on last year. More stock, more negotiating room and less competition is a buyer’s environment. In Brisbane and Perth, well-presented properties are still drawing genuine competition on both sides of the country.
Cotality 2026
Rents Keep Rising.
The Numbers Are Hard to Ignore.
Annual rent growth has reaccelerated to 5.7% nationally, up from 3.4% in mid-2025, and gross rental yields are expanding for the first time this cycle, rising to 3.59% nationally. Darwin leads all capitals at 9.2% annual rental growth, reaching $699 per week, with Perth and Brisbane following at 6.7% each.
Sydney’s median rent has reached $824 per week, up 5.9% on the year. The national vacancy rate sits at 1.7%, well below the decade average of 2.5%, and in Queensland the statewide figure is effectively 1.0%. New dwelling completions remain structurally short of what population growth demands, which means the rental income case for well-located property is not a cyclical tailwind but a durable one.
Cotality 2026
The Budget: What It Means for Investors
The 13 May Federal Budget delivered the most significant change to property tax settings in decades. Negative gearing on established residential properties bought after 12 May 2026 will be abolished from 1 July 2027, and the 50% CGT discount is being replaced with an inflation-indexed model that introduces a minimum 30% tax on gains from the same date.
Investors who purchased before that date or who were already under contract are fully grandfathered, and new builds remain entirely exempt with negative gearing and CGT benefits intact. The legislation has not yet passed the Senate and the final rules may shift, but the direction of travel is clear. Demand is likely to rotate toward new builds and positively geared established properties, and investors who move now on well-priced established stock with genuine cashflow are locking in a tax treatment that will not be available to buyers who wait.
Things to Keep an Eye On
The negative gearing and CGT changes. Legislation is not yet through the Senate and negotiation will continue, but the policy direction is clear. Grandfathered investors and new build buyers are the structural beneficiaries, and investors evaluating new builds should factor retained tax advantages explicitly into their modelling.
RBA rate trajectory. The cash rate is at 4.35% and ANZ forecasts an extended hold from here. Buyer demand historically returns quickly once the RBA signals it is finished, and the current window of higher stock and lower competition is where prepared buyers tend to find their best entry points.
Consumer confidence recovery. At 66.4, confidence has turned from its historic low and the trajectory matters as much as the level. A sustained recovery typically precedes a return of buyer demand in growth corridors, particularly Sydney and Melbourne’s outer rings.
Brisbane’s Olympic infrastructure pipeline. Planning approvals and rezoning tied to the 2032 Games are creating long-run value in inner and middle-ring Brisbane. This is still early in a multi-year tailwind and the most significant opportunities have not yet been priced in fully.
Regional vacancy and rent momentum. Combined regional vacancy sits at 1.9% with rents growing 6.0% annually. Markets like Toowoomba, Ballarat, Bendigo and Bunbury offer strong fundamentals at price points well below the capital city median.
The supply gap. Just 168,050 dwellings commenced nationally in 2024, well below what underlying demand requires. Until that changes materially, the structural conditions supporting price growth and rental income remain firmly in place.
