Budget changes have effected national property sentiment

A NEW report has confirmed Australia’s property slowdown in the wake of the Federal Budget changes to capital gains tax and negative gearing.

Residential, office and retail markets recorded a “notable decline” with only industrial and agricultural real estate remaining positive.

The downturn in sentiment is revealed in the Australian Property Institute’s Q3 2026 survey, with property valuers making up 80 per cent of respondents.

The headline API Property Market Outlook Index came in at 5.1 out of 10, near the neutral level.

“That represents a notable decline from the previous quarter’s reading of 6.0,” said report author and API chief economist Sherman Chan.

“Every state is expecting a slowdown led by the residential sector, which has been unsettled by the recently announced changes to the capital gains tax and negative gearing arrangements.”

The overall residential market score was five out of 10 nationwide.

NSW recorded 4.3, down from 5.2, and Victoria just four, down from five, both States rated as being in “cautious” territory.

The industrial sector remained the most resilient with a national market sentiment score of 6.4 but down from 6.9 for the previous quarter.

The office sector was the most cautious with a third consecutive quarter of below-neutral reading.

Offices scored 4.6, down from 4.9 and 4.8 in the previous quarters. Agricultural land scored 5.8, down from six.

As for the future, “property professionals have mixed or uncertain views,” Chan said.

There was consensus on just a few factors:

The interest rate outlook was expected to put downward pressure on prices across all asset classes.

• Office and retail would suffer from subdued business and consumer confidence.
• The residential market would see upward pressure from construction costs, population growth and lack of supply, but downward pressure from the negative gearing and CGT reforms.
• Industrial property prices will be supported by a lack of supply and zoned land.
• Agricultural prices will be supported by domestic demand for agricultural products.

Chan said the overall nationwide score of 5.1 “indicates a loss of optimism on average at the national level”.

“Nevertheless, the state breakdown shows that a degree of optimism remains in Queensland (6.6) and Western Australia (6.4),” she added.

The full report is available at api.org.au.