June 2026 edition

Market Observations

Key Takeaways:

• Budget reforms remain proposals, not legislation
• Lenders have already updated servicing policies for investors
• Auction clearance rates have fallen to six-year lows
• Markets expect the RBA to pause rates in June
• New-build property remains the major winner from proposed tax reforms

May was dominated by discussion surrounding the Federal Budget and its potential implications for wealth creation, property investment and intergenerational planning. The proposed reforms to capital gains tax, negative gearing and discretionary trust distributions represent some of the most significant changes facing investors, business owners and high-net-worth families in recent years.

While many of these measures remain subject to legislation, the market has already begun responding. Lenders have updated servicing policies, investors are reassessing acquisition strategies, and advisers are increasingly reviewing ownership structures, lending arrangements and succession plans.

This month, we look at how lenders have adapted to the proposed negative gearing changes, what softer auction clearance rates may be signalling about buyer sentiment, and the key considerations investors should be discussing with their advisers as the policy landscape continues to evolve.

The common theme remains unchanged: periods of uncertainty often create the greatest value for those who focus on structure, flexibility and long-term strategy rather than reacting to headlines.

While the Budget proposals have generated significant discussion, it is important to remember that many of the headline measures have not yet become law.

The next phase involves parliamentary debate, committee review and legislative negotiation throughout the coming months. As currently proposed:

June 2026: Ongoing parliamentary review and negotiation of the tax reform measures.

1 July 2026: Personal income tax cuts commence, alongside the extension of the $20,000 instant asset write-off for eligible small businesses.

1 July 2027: Proposed commencement of the capital gains tax reforms and negative gearing changes for established residential properties.

1 July 2028: Proposed commencement of the minimum 30% tax on discretionary trust distributions.

For investors and advisers, this means there remains time to assess structures, model potential outcomes and make informed decisions. While the direction of policy appears clear, the final legislation may differ from the current proposals as the reform package moves through Parliament.

1. Changes Facing HNW Families

The 50% CGT discount is proposed to be replaced with an inflation-adjusted model and minimum 30% tax rate, potentially changing the after-tax outcome of future asset sales.

Negative gearing benefits for established residential properties are proposed to be restricted, with losses generally quarantined against future property income or capital gains. New-build properties are expected to retain broader deductibility benefits. Deductions are being delayed, not disappearing.

In a tight rental market, landlord cost pressures are likely to flow through to tenants.

A proposed 30% minimum tax on discretionary trust distributions may reduce the effectiveness of traditional income streaming strategies. Many family groups and investors may reassess trust structures ahead of the proposed 1 July 2027 commencement.

Work closely with advisers to model the after-tax impact of future asset sales under both frameworks.

Consider whether bringing forward selected disposals prior to 1 July 2027 may be advantageous under the current regime.

Reassess long-term ownership structures and intergenerational transfer strategies.

Consider how future lending capacity and servicing may be impacted under revised deductibility rules.

Review cash flow assumptions on existing property portfolios where loss deductibility may change materially.

Assess whether debt structures, ownership entities or portfolio sequencing should be adjusted ahead of commencement.

Model the tax implications of future distributions under the proposed minimum tax framework.

Compare discretionary trusts against alternative structures including companies, partnerships and direct ownership.

Ensure lending, investment and succession strategies remain aligned with broader family wealth objectives.

2. Auction markets reflect a more cautious buyer environment

While much of the attention has focused on the Federal Budget and proposed changes to negative gearing and capital gains tax, recent auction data suggests buyers are already becoming more selective.

The latest figures show the combined capital city auction clearance rate falling to 54.5%, the lowest level recorded since April 2020. At the same time, auction volumes have increased, indicating more properties are coming to market while buyer demand has softened.

What does this mean?

Several factors appear to be contributing to the softer conditions

• Three interest rate increases this year have reduced borrowing capacity and affordability.
• Consumer confidence has weakened amid ongoing geopolitical uncertainty and rising living costs.
• Proposed Budget changes have created hesitation among some investors, particularly those considering established investment properties.
• Listing volumes are gradually increasing from the unusually tight conditions experienced throughout late 2025.

While this does not suggest a broad housing downturn, it does indicate a shift in the balance between buyers and sellers compared to 12 months ago.

For buyers, this may create opportunities through increased negotiation power and a wider selection of properties.

For sellers, pricing expectations may need to become more aligned with current market conditions, particularly in investor-heavy segments where demand has softened the most.

Importantly, markets remain highly fragmented. Adelaide continues to demonstrate resilience, while Sydney and Brisbane have experienced the most noticeable decline in auction performance. As always, local market fundamentals, asset quality and financing strategy remain more important than national headlines.

For long-term buyers, softer auction markets can often create opportunities that don't exist when competition is at its peak. The ability to negotiate, undertake more thorough due diligence and access a broader range of stock can become valuable advantages.

3. There is a RBA meeting this month

The RBA meets for the 4th time this year, with an result of a 0.25% increase at each of the first thee meetings (from 3.60% to 4.35%).

It is unlikely we will see a fourth with futures markets overwhelmingly expecting a pause at the June meeting.

The RBA remains highly focused on employment data, consumer spending, and core inflation metrics.

Headline inflation dropped from 4.6% to 4.2% in April, but trimmed mean inflation (removing the largest increases and largest decreases - the RBA's indicator) increased from 3.3% to 3.4% in April.

Australia's labour market is beginning to soften, with unemployment rising to 4.5% and employment falling by 18,600 people in the latest ABS Labour Force report. The data adds to growing evidence of a slowing economy and has increased expectations that the RBA may pause further rate increases as it seeks to balance inflation pressures against weakening employment conditions.

Even so, we saw NAB increase short-term (one and two-year) interest rates last week by 0.15%, signalling a potential of further rate rises later this year. NAB expect one more rate rise in the August meeting.

Sally Tindall, Canstar's data insights director highlighted

Fixed rates are often a window into what banks think is coming next. NAB’s decision to lift its short-term fixed rates suggests it’s not ready to rule out further rate rises, even though the RBA will almost certainly hit pause next month.

While markets are pricing a pause in June, the inflation story remains unresolved. For borrowers, this reinforces the importance of maintaining sufficient cash-flow buffers and ensuring lending structures remain appropriate should rates remain higher for longer.

Case Study | Finance Showcase

Many clients assume complexity limits their options. In reality, the right structure and lender selection can often unlock outcomes that initially appear out of reach.

Introduced by an existing client, this transaction involved the refinance and simplification of a $7.2m property portfolio for a Senior Legal Partner, alongside a $2m equity release to support a new investment acquisition.

The client held 10 properties across 12 facilities, with several loans at higher LVRs and multiple securities crossed, limiting flexibility and pricing.

Income flowed across several entities and required reliance on an employment income letter in isolation, with a temporary tax debt position due to the timing of partnership distributions.

Our approach

• Structured the transaction using the employment income letter in isolation with a Private Bank.
• Timed settlement within a window where the tax liability position was cleared.
• Consolidated facilities to release unnecessary securities and simplify the structure.
• Reduced portfolio LVRs to sub-70% to improve pricing and long-term flexibility

Outcome

A streamlined portfolio structure, improved pricing through lower leverage, and $2m equity released to support the client’s next investment opportunity.

Strategic portfolio simplification while creating flexibility for what comes next.

Thanks to Ben Donald for reviewing the client’s life insurance arrangements alongside the broader engagement.

It was a complex case in its own right and resulted in a restructure that saved the client thousands while improving their overall protection position.

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.

In practice, we’re seeing advisers use this information to

• sense-check whether existing lending remains competitive
• support conversations around refinancing or restructuring opportunities
• frame expectations ahead of acquisition decisions
• interpret the direction of funding costs beyond media commentary
• provide context around fixed-rate strategy and floating-rate exposure

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

What lenders are telling us about negative gearing.

Following the Federal Budget, lenders have moved quickly to update how they assess investment lending applications. While the legislation is yet to be finalised, most lenders are treating the proposed changes as a foreseeable event and have begun adjusting serviceability assessments accordingly.

The most notable development this month has been how quickly lenders have responded to the proposed negative gearing reforms, despite legislation still being debated.

Key themes emerging across lender policies

Our observation

The most important takeaway is that lenders are not treating all investment properties equally.

The changes appear to be creating a clear distinction between:

• New-build housing supply
• Existing grandfathered investment properties
• Improvement and value-add projects

Versus

• Highly leveraged purchases of established investment properties after 12 May 2026

For clients and advisers, this reinforces the importance of discussing structure and borrowing strategy before entering into contracts, rather than after.

Partner Focus

One of the greatest advantages our clients have is access to a trusted network of specialists who work alongside us. Each month, we'll showcase one of our preferred partners, sharing their expertise and insights on the topics shaping today's market.

This month, we're featuring Lauren Staley from Infolio Property Advisors, a Melbourne-based buyer's advocate who has spent more than two decades helping clients acquire high-quality residential property. With the Federal Budget, interest rates and market sentiment dominating headlines, Lauren shares why periods of uncertainty can often create some of the best opportunities for well-prepared buyers.

Why buying in a market where everyone else is cautious can be the best decision.

Lauren, Infolio Property Advisors

It might sound self-serving coming from a buyer's agent, but after more than 20 years purchasing property across multiple market cycles, I've learned that some of the best opportunities emerge when sentiment is subdued.

Here are a few observations from the current market

1. Life doesn't wait for market conditions

People continue to move due to marriage, divorce, growing families, career changes and lifestyle decisions. These life events create opportunities regardless of what's happening in the broader economy.

2. If you're buying and selling in the same market, conditions affect both sides

Many clients focus solely on the purchase price while forgetting that the same market conditions also influence the value of the property they're selling.

3. Less confidence often means less competition

When buyers sit on the sidelines waiting for certainty, those who remain active often have access to better opportunities and less competition.

4. Vendors become more realistic

In slower markets, motivated sellers are often more willing to negotiate, creating opportunities that may not exist during stronger market conditions.

5. Time in the market still matters most

The clients I've seen build the most wealth through property weren't those who perfectly timed the market. They bought quality assets and held them through multiple cycles.

6. Melbourne's fundamentals remain compelling

Population growth, infrastructure investment, lifestyle appeal and ongoing housing undersupply continue to support the long-term outlook for Melbourne property.

7. The best properties still attract demand

Even in softer markets, premium assets remain highly sought after. Preparation, strategy and access to off-market opportunities remain critical.

8. Waiting for perfect conditions rarely works

In my experience, more clients regret waiting than buying. Markets are never free from uncertainty — there is always a reason not to act.

Lauren's perspective

Don't let today's headlines distract you from your long-term objectives. Interest rates, taxation changes and market sentiment will come and go. Quality assets, purchased well and held for the long term, tend to endure.

About Infolio Property Advisors

Melbourne-based buyer's advocacy specialising in helping clients acquire high-quality residential property through a strategic, research-driven approach.

Final Thought

Markets continue to adjust to a rapidly evolving policy environment.

While headlines are focused on tax reform, rates and politics, we believe the most successful clients will be those who remain focused on the fundamentals: quality assets, appropriate structures, strong cash flow and long-term decision making.

If you would like to discuss how any of the themes in this month's edition may affect your position, our team is always available for a confidential discussion.