July 2026 edition

Market Observations

Key Takeaways:

• Proposed end of SMSF residential borrowing from July 2027
• Auction clearance rates fall to six-year lows
• National dwelling prices record a third consecutive monthly decline
• Sydney and Melbourne continue to soften while Perth remains resilient
• Banks remain divided on the path of interest rates

June highlighted a market becoming increasingly selective.

While headlines focused on the proposed SMSF borrowing reforms, broader housing data suggests buyer confidence has also softened. Auction clearance rates have fallen, dwelling prices have eased for a third consecutive month and investors are increasingly reviewing how they structure future acquisitions.

Rather than signalling widespread weakness, these trends point towards a market becoming more disciplined. Quality assets continue to attract capital, but buyers are demanding stronger fundamentals, greater flexibility and better value.

As always, periods of structural change often create opportunities for investors who focus on long-term strategy rather than reacting to short-term headlines.

Below are the four developments we believe are most relevant for advisers working with high-net-worth clients.

1. End of SMSF Residential Borrowing

One of June's biggest announcements was the Federal Government's proposal to prohibit future Limited Recourse Borrowing Arrangements (LRBAs) for residential property inside SMSFs from 1 July 2027.

Existing arrangements are expected to be grandfathered, however new leveraged residential acquisitions inside super would no longer be permitted.

What this means

SMSF borrowing has grown significantly over the past five years, increasing from approximately $52 billion to more than $80 billion, with residential property accounting for almost 80% of total LRBA exposure.

While the impact on the broader housing market is expected to be modest, it represents a meaningful structural shift for sophisticated investors who have historically used superannuation as a tax-efficient vehicle to build residential property portfolios.

Our observation

For many high-net-worth families, this is less about property and more about structure.

We're already seeing discussions around

• Commercial property strategies inside SMSFs
• Accelerating acquisitions before legislation
• Alternative ownership structures outside super

Timing Matters

Investors looking to acquire residential property using an SMSF loan should ensure the Contract of Sale is signed and exchanged before 10 August 2026. Settlement may occur after this date, provided the contract was executed beforehand.

2. Housing Market Continues To Cool

Auction markets continued to soften throughout June, with combined capital city clearance rates falling to their lowest level since the COVID period.

At the same time, Cotality reported Australia's third consecutive monthly decline in dwelling values, with Sydney and Melbourne leading the correction while Perth continues to outperform.

What we're seeing

• Buyers remain active but increasingly selective.
• Negotiation has become more important.
• Premium markets are experiencing greater price pressure.
• Strong assets continue to transact, although often with longer campaigns.

Our observation

Markets are becoming increasingly fragmented.

Rather than one national property market, we're seeing multiple local markets behaving very differently.

For experienced buyers, softer conditions often create the greatest opportunity to negotiate quality assets.

3. Interest Rate Expectations

Rather than focusing solely on the next RBA decision, markets are increasingly looking towards where rates settle over the medium term.

Current forecasts remain mixed, highlighting the uncertainty that continues across both inflation and economic growth.

While most economists expect the RBA to remain on hold before gradually easing rates during 2027, Westpac continues to hold a noticeably different view.

Westpac is forecasting two additional 25 basis point rate hikes in August and September 2026, taking the cash rate to 4.85%. The bank believes persistent inflation, rising wage pressures and higher energy costs could keep inflation above the RBA's target for longer than markets currently expect.

By contrast, CBA, ANZ and NAB all expect the next phase of the cycle to involve rate cuts throughout 2027, highlighting just how uncertain the outlook remains.

Our Observation

Rather than trying to predict the next RBA move, we continue to encourage clients to focus on building resilient lending structures that perform under multiple interest rate scenarios.

With forecasts diverging significantly, flexibility, liquidity and appropriate debt structuring remain far more important than attempting to perfectly time the interest rate cycle.

Case Study | Finance Showcase

Many executives appear asset rich on paper but find their borrowing capacity doesn't reflect the full value of their wealth. With the right lending strategy, share-based remuneration can become part of the solution rather than the obstacle.

Recently assisted a Senior Executive of an ASX-listed company who wanted to secure their long-term family home while preserving their investment portfolio.

The transaction involved the sale of his current home but also needed income to support the price-point.

The Challenge

• Traditional servicing based on salary and bonus alone was insufficient.
• Significant wealth held in vested shares and future Employee Share Schemes (ESOP/RSUs).
• Selling shares would trigger unnecessary tax and create market disclosure implications.

Our Strategy

• Structured lending using salary, bonus, vested shares and future vesting schedules.
• Secured a net-$4m lending facility while preserving the client's investment portfolio.
• Coordinated simultaneous sale and purchase settlements to maximise liquidity and minimise cash outlay.

Outcome

The client upgraded into their new home without liquidating their share portfolio, preserving long-term wealth while avoiding a significant capital gains event.

A tailored lending solution that recognised the full picture of the client's wealth, not just their payslip.

Rate Card

A practical reference point for client conversations.

Each edition of Perspectives includes a snapshot of current bank pricing, RBA positioning, and BBSW movements to support the discussions you’re having with clients in real time.

For many High-Net-Worth clients, lending decisions are rarely driven by headline rates alone. However, understanding where pricing is moving across the market can help frame conversations around timing, structure, liquidity strategy, and asset positioning.

We commonly see advisers using this information to

• benchmark existing lending
• identify refinancing opportunities
• frame expectations ahead of acquisition decisions
• understand wholesale funding movements
• frame fixed versus variable rate conversations

Importantly, shifts in BBSW and wholesale funding costs often influence pricing before changes appear in standard variable rates. Having visibility across these movements can help you stay ahead of the curve when advising clients.

Team Insights

Welcoming Ramsin Dallo

As demand for strategic lending advice continues to grow, we're pleased to welcome Ramsin Dallo to Lydian Private Office.

Ramsin joins as Business Development Manager and will focus on strengthening relationships with accountants, financial advisers and referral partners while supporting our continued growth.

This addition reflects our ongoing investment in delivering a high-touch experience for both clients and professional advisers.

Final Thought

The most valuable lending conversations rarely begin with interest rates, they begin with structure.

Whether it's responding to policy changes, simplifying a complex portfolio or unlocking capital tied up in executive equity, the right lending strategy can materially influence long-term wealth outcomes.

That's where we believe specialist advice adds the greatest value.

What We're Seeing

Across the transactions we've worked on this month, one theme continues to emerge: sophisticated clients are placing greater emphasis on flexibility than leverage.

If you'd like to discuss any of the themes in this month's edition, we'd be pleased to arrange a confidential strategy session.