By Guest Blogger, Andrew Bell, Chairman, Ray White Bell Group
Chairman | The Ray White Surfers Paradise Group
QLD Board Member | Real Estate Institute of Australia
After five years of pandemic and post-pandemic focus on the real estate market - which saw extraordinary growth in property values throughout the country - it was always inevitable that the market would eventually take a breather.
Property values had effectively doubled in many markets around Australia and simply could not continue advancing at 10% per annum while ever income growth failed to keep pace at anything close to the same rate.
However, the fundamentals remained clear: stronger population growth than the construction of new housing has created a perpetual shortage of property throughout Australia. That imbalance continues to place upward pressure on real estate prices.
Why the Property Market Began Slowing in 2025
We did start to see some slowing in price growth during the latter part of 2025, but 2026 has brought significant disruption. We began the year with a surprise jump in inflation, resulting in the first interest rate rise, followed by the outbreak of war in the Middle East, which has driven up costs across the board and placed further pressure on inflation. That, in turn, has resulted in additional interest rate rises.
Most recently, we’ve seen major budget announcements involving changes to negative gearing and capital gains tax. These changes affect not only real estate, but all forms of investing in Australia.
Inflation, Interest Rates & Global Uncertainty Impacting Real Estate
From the Reserve Bank’s perspective, the core focus remains bringing inflation back into the 2–3% target range. That is currently the number one factor influencing the real estate market. We are likely to see interest rates remain elevated throughout 2026 and, depending on how inflation unfolds, it may not be until sometime in 2027 that we begin to see rates ease.
The changes to negative gearing will alter the volume and type of investors participating in the property market, simply because some people will no longer be in a position to buy.
How Negative Gearing Changes Will Reshape Property Investment
Negative gearing has historically been most beneficial in the first few years of ownership, particularly for investors with smaller deposits and larger borrowings. Many of those buyers will now be excluded from the market altogether.
There will still be investors in the marketplace, but they are likely to focus on one of two areas:
The first is brand-new developments, where negative gearing concessions remain available; or the second is investment properties under the $1 million mark, where buyers are more likely to afford larger deposits and therefore have less reliance on negative gearing.
Importantly, tax losses can still be carried forward, they simply cannot be offset annually in the same way to reduce taxable income year by year.
Capital gains tax is, ultimately, what it is. Australia has benefited from discounted capital gains tax arrangements for a long time. But capital gains tax applies across all forms of investment whether shares, cryptocurrency, commodities or property.
While many may not welcome the changes, real estate will continue to be viewed by most Australians as one of the safest investment classes available, particularly because it also provides annual income yield.
There is a strong probability that many existing investment property owners will simply hold onto their assets. Those who are grandfathered under existing negative gearing arrangements are unlikely to sell, while others facing higher future capital gains tax liabilities may also prefer to hold rather than crystallise those tax obligations.
There may be a short-term rush of sales from owners who are uncertain about their options or who have not yet sought advice or structured strategies. However, that period is likely to occur over the next three to six months before tapering off.
One thing I’ve learned in life is that nothing is ever quite as good as expected and nothing is ever quite as bad as expected either.
Australia’s Housing Shortage Isn’t Going Away
Once the initial uproar around these tax changes settles, the market will likely find equilibrium again and continue to be driven by the one factor that simply cannot change anytime soon: population growth continuing to outpace the construction of new homes. That means Australia’s property shortage will continue to worsen year by year.
The real losers from these tax changes are likely to be tenants.
A shrinking pool of rental properties will place upward pressure on rents and increase the risk of homelessness. Reduced investor activity, combined with the natural depletion of rental stock through sales, deaths, divorces and financial pressures, will steadily reduce the availability of rental housing.
Rising Construction Costs & Pressure on New Developments
The next sector likely to feel pressure will be new developments.
Construction costs have risen sharply through inflation, and we are likely to see substantial increases in the pricing of future apartment and housing projects. Buyers considering newer-style apartments may therefore be wise to focus on completed or near-completed developments such as Chevron One, where construction pricing has already been locked in.
Projects completing now may well represent some of the last opportunities to purchase at 2026 construction pricing, before future developments reflect the higher building costs expected in 2027 and beyond.
The Gold Coast Property Market Continues to Grow
At the end of the day, the Gold Coast continues to attract one of the largest migration inflows in the country. As I’ve said for many years, the Gold Coast is not perfect. But tell me where is better?
Andrew Bell OAM
Chairman | Ray White Bell Group
Chairman | Real Estate Institute of Australia
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