Australia’s property market in 2026 is navigating a rare combination: the Reserve Bank has delivered three rate rises this year, and the May federal Budget introduced the most significant tax changes to property investment in nearly three decades. National home prices were flat in May, with Sydney and Melbourne already seeing declines. Here’s what you actually need to know.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Price growth had already been slowing since early 2026 across most capital cities. Auction clearance rates had been easing, and we were clearly moving through the later stages of a long growth cycle. Then the Budget added another layer of complexity. But it doesn’t rewrite the fundamentals — population growth, a chronic housing shortage, and rising national wealth are still in place. What has changed is the investment calculation for buyers of established properties going forward.
If you’re looking at apartments right now, the key is understanding how these changes affect what you’re willing to pay — and how you negotiate. The old rules of thumb don’t apply the same way anymore. Before you start making offers, it’s worth understanding what strata fees really cover, because those ongoing costs will matter more when your tax position shifts.
The central concept here is negative gearing — when the costs of owning a rental property (interest, maintenance, strata fees) exceed the rental income, and that loss reduces your taxable income. Under current rules, that loss can be offset against your salary or business income. From 1 July 2027, for established properties bought after Budget night, that changes: losses can only offset other property income.
What I tend to notice is that most buyers focus on the purchase price and forget about the tax treatment until after they’ve signed. That order is backwards now. The tax changes mean the same apartment can have a very different long-term value depending on when you buy it and whether it’s new or established.
What the rate rises and tax changes mean for apartment prices
The three RBA rate rises this year delivered the shortest and shallowest rate-cutting cycle since inflation targeting began. That matters because higher rates reduce borrowing capacity, which directly affects what buyers can offer. Combined with the Budget changes, the market is now in genuinely new territory.
Cotality’s national Home Value Index was flat in May — 0.0% — after a modest decline in April. But beneath that flat national result, Sydney fell 0.9% and Melbourne dropped 0.8%. Those are the two biggest markets in the country, and they’re leading the downturn. PropTrack data confirms home price growth has stalled as this year’s consecutive rate hikes flow through.
The banks are split on what happens next. CBA, NAB and ANZ all expect the RBA to leave the cash rate unchanged for the rest of this year. Westpac expects two further rate hikes in August and September, followed by cuts — but not until 2028. That uncertainty alone is enough to make sellers more negotiable than they were six months ago.
For apartment buyers, this creates a specific window. Sellers who bought before Budget night are grandfathered — their tax position is secure — but they’re also facing a market where buyers have less borrowing power and more reason to be cautious. That tension is where good deals happen. If you’re looking at an apartment in a block where several units are listed, the seller knows they’re competing not just with other properties but with a shifting tax landscape.
One thing I’d do in this environment is look closely at listing times. An apartment that’s been on the market for 60+ days in Sydney or Melbourne is likely to have a vendor who’s already adjusted their expectations once. They may be willing to adjust again. It’s also worth running through a thorough inspection checklist before you negotiate, because any defects you find are leverage points in a softening market.
Where buyers get the negotiation wrong right now
Assuming the old tax rules still apply to your purchase
The biggest mistake I see is buyers of established apartments running their numbers based on the current negative gearing rules. If you buy after Budget night, those rules change on 1 July 2027. That means the rental loss you’re counting on to reduce your tax bill may only offset property income — not your salary. Run the numbers both ways. If the apartment only works financially under the old rules, you’re overpaying.
Ignoring the new build premium
New apartments are fully exempt from the new rules. Investors can still negatively gear them and choose between the old or new CGT treatment. That’s a significant advantage, and sellers of new builds know it. But many buyers still treat new and established apartments as interchangeable. They’re not anymore. The premium you pay for a new build may be worth it purely for the tax treatment — but only if the location and quality justify it.
Focusing only on the purchase price
In a flat or declining market, it’s tempting to fixate on getting the vendor down by $20,000. But the real cost difference between a good and bad apartment deal often comes from the holding period. Strata fees, special levies, and interest rates matter more when capital growth is slow. An apartment with high strata fees and an upcoming special levy will eat into your returns much faster than a slightly higher purchase price on a well-managed block. If you’re unsure about the financial health of the building, it’s worth understanding body corporate fees before you make an offer.
Waiting for the perfect moment
The market is fragmented. Some suburbs are still seeing price growth while others decline. Waiting for a national bottom is a strategy that rarely works because the bottom arrives at different times in different places. The risk is that you wait for Sydney to bottom, miss the recovery in a specific suburb, and end up paying more later. The better approach is to know what a fair price is for that specific apartment in that specific market, and negotiate from there.
→ Scroll right to see all columns
| Buyer type | New build apartment | Established apartment (post-Budget) |
|---|---|---|
| Negative gearing | Fully available — losses offset any income | Restricted from 1 July 2027 — losses offset property income only |
| CGT discount | Choose old 50% discount or new indexation + 30% minimum | New rules apply — cost base indexation + 30% minimum tax |
| Grandfathering | Not applicable (exempt) | Not applicable (new purchase) |
| Negotiating position | Vendor knows tax advantages — less flexible on price | Vendor faces smaller buyer pool — more room to negotiate |
How to negotiate an apartment deal in this market
Know the vendor’s position before you start
If the vendor bought the apartment before Budget night, they’re grandfathered. Their tax position doesn’t change regardless of what happens to the market. That means they can afford to hold longer if they don’t like your offer. If they bought after Budget night, they’re facing the new rules themselves — and may be more motivated to sell before the 1 July 2027 deadline when those rules kick in. Ask your agent or do a title search to find out when the current owner purchased. That single piece of information tells you a lot about how flexible they can be.
Use the rate uncertainty as leverage
With the RBA potentially hiking again in August and September, buyers’ borrowing capacity is uncertain. Sellers know this. When you make an offer, you can point to the flat or declining price data in Sydney and Melbourne as evidence that the market is softening. You’re not guessing — the data is public. Cotality’s May figures show Sydney down 0.9% and Melbourne down 0.8%. That’s not a crash, but it’s a trend, and trends matter in negotiation.
Factor the tax changes into your maximum price
Work out what the apartment is worth under both tax regimes. If you’re buying an established apartment, calculate your net return assuming you can only offset losses against property income from 1 July 2027. If that number is lower than what you’d get under the current rules, reduce your offer accordingly. The vendor doesn’t need to know your internal calculation — they just need to see a realistic offer that reflects the market conditions. If you’re unsure how to model this, a service like JustAnswer Finance can help you run the numbers with a qualified professional.
Look for motivated sellers in oversupplied areas
Listings in Sydney and Melbourne are running above their long-term averages. That means more choice for buyers and more competition among sellers. Apartments that have been on the market for 60–90 days are prime targets. The vendor has already had time to realise the market isn’t as strong as they hoped. A clean, unconditional offer at 5–10% below asking is more likely to be accepted now than it was six months ago. Just make sure you’ve done your due diligence on the building first — the age of an apartment affects everything from maintenance costs to lending restrictions.
New builds: negotiate on inclusions, not just price
New build vendors are less likely to drop the price because they know the tax advantages are valuable. But they may be flexible on inclusions — upgraded appliances, finished landscaping, a parking space, or covering stamp duty. These have real value and don’t affect the vendor’s recorded sale price. If you’re buying off-plan, ask about early settlement discounts or contribution to your legal fees. Every dollar you don’t spend is a dollar saved, even if it doesn’t show up as a lower purchase price.
Frequently asked questions about negotiating apartment deals in Australia
Can I still negatively gear an apartment I buy today? ▾
Does the CGT change affect owner-occupiers? ▾
What if I buy an established apartment but plan to renovate it? ▾
Are regional apartments affected differently? ▾
How do I know if a vendor is grandfathered? ▾
Should I wait until after the rate cuts to buy? ▾
The long view hasn’t changed — but the short-term calculation has
Over the long term, the fundamentals haven’t changed. Population growth, chronic housing undersupply, and Australia’s wealth trajectory will continue to underpin property values. Strategic investors who buy well-located, investment-grade properties and hold them for the long term will continue to outperform. What has changed is the path to get there. The next 12–18 months will be defined by fragmented markets, cautious buyers, and sellers who need to adjust their expectations.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Unit Blocks: Are They Worth the Hassle? An Aussie Perspective.
Sources and Further Reading
Tips for Understanding Security Deposits When Renting in Australia — Practical guidance on deposit rules and protections if you’re renting out your apartment.
Top Tips for Buying a Student Condo in Australia — Specific advice for investors targeting the student accommodation market.
Property Update (2026). Australian Property Market Predictions. 🔗
Cotality (2026). National Home Value Index, May 2026.
PropTrack (2026). Home Price Index, May 2026.
