What’s driving the drop in auction clearance rates?

After years of fierce competition, fast-rising prices and crowded auction weekends, the market is beginning to show signs of a shift. More properties are being listed for sale, homes are taking longer to sell, and buyers are becoming increasingly selective about what they’re willing to pay.

One of the clearest signs of this changing market can be seen in auction clearance rates. Nationwide, fewer properties are selling under the hammer, with clearance rates recently dipping below 50%. In Sydney and Melbourne, auction success rates have dropped to their lowest levels in years.

While this may sound like bad news for sellers, it could create opportunities for buyers. A softer market can mean less competition, more room to negotiate and a greater chance of finding the right property without feeling pressured to act quickly.

So, what’s driving the decline in auction clearance rates, and what could it mean if you’re looking to buy?


Federal Budget tax changes

In the recent Federal Budget, the Government announced it would reform negative gearing and capital gains tax (CGT). These measures are now law.

Under the changes, which will apply from 1 July 2027, negative gearing for residential property investments will generally be limited to new builds. The 50% CGT discount for individuals, trusts and partnerships will also be replaced with cost base indexation and a 30% minimum tax rate on capital gains.

Existing investments held at 7:30pm AEST on 12 May 2026 will generally be exempt from the negative gearing changes, and CGT reforms applying only to gains that accrue after 1 July 2027.

These changes have cooled investor demand, with many putting their purchasing plans on ice. This in turn has impacted auction activity.


Cautious buyers and differing expectations

Changing market conditions have seen buyer demand soften, with many purchasers taking a more measured approach and spending longer evaluating their options. At the same time, some sellers are still adjusting their expectations to the current market environment, creating a wider gap between buyers’ and sellers’ expectations.

This gap in expectations is also influencing auction results. With buyers approaching the market more cautiously and auction clearance rates falling, some properties are not reaching their reserve price and are being passed in on auction day before moving to private negotiations.


Interest rate hikes

Since the beginning of this year, we’ve seen the cash rate increase three times. Lenders have, in turn, increased their interest rates, which reduces the amount buyers can borrow.

Rising interest rates affect auction activity by tightening buyer budgets and impacting consumer confidence. With fewer eager buyers competing for properties, vendors might struggle to reach their reserve price, resulting in a property being passed in.


How do the falling auction clearance rates affect buyers?

A cooling property market can create more opportunities for buyers. When fewer properties sell under the hammer, it often means less competition, fewer emotional bidding wars, and more room to negotiate on price and terms.

Instead of feeling pressured to make decisions in a competitive auction environment, buyers could have more time to complete their research, secure finance approval and negotiate directly with vendors. In some cases, sellers might also be more willing to consider offers before or after auction if they’re keen to achieve a sale.

For buyers who have been sitting on the sidelines, changing market conditions may provide an opportunity to reassess their options and purchasing plans. While every local market is different, changing conditions can open doors that would not have been available when competition was at its peak.

That’s why now could be a good time to speak with your broker. Whether you’re actively looking or simply keeping an eye on the market, having a clear understanding of your borrowing power and available finance options can help you be ready to act when an opportunity arises. With market conditions shifting, a home loan review can also help you assess whether your current loan remains appropriate for your needs and circumstances.


Why it’s important to have your finance in order

Before bidding at auction, it’s important to get a clear understanding of the current market values for similar properties in your desired area and understand your finance position. Auctions are typically unconditional. You can’t add a ‘subject to finance’ clause and there is no cooling off period.

If the reserve price is met and you’re the successful bidder, you’ll generally be required to sign the contract and pay a deposit on the day, typically 10% of the purchase price. From this point, the purchase becomes legally binding, with ownership transferring at settlement.



To better understand your borrowing capacity and available finance options, get in touch with us today. We can discuss your circumstances, explain the lending options available and help you navigate the application process.

Are investors changing course after the new negative gearing reforms?

August 20, 2026
The Federal Government’s negative gearing and Capital Gains Tax (CGT) reforms represents a significant shift in how future property investments will be treated for tax purposes. For investors considering their next purchase, the changes may influence everything from the type of property they buy to how they assess cash flow and long-term returns. Legislated, many investors are reassessing their property purchasing plans and strategies. The core reforms have now passed Parliament, although some of the more detailed implementation rules are still being finalised ahead of their commencement. If you’re looking to buy an investment property down the track, here’s what you need to know about the reforms and how they change the playing field. What is changing? On 12 May, Treasurer Jim Chalmers handed down the Federal Budget , which included major changes to negative gearing and CGT rules. From 1 July 2027: Negative gearing for residential property investments will be limited to new builds. The 50 per cent CGT discount will be replaced with cost base indexation and a 30 per cent minimum tax rate on capital gains. Properties held before the announcement (7:30pm AEST 12 May 2026) will be exempt from the negative gearing changes, while the CGT reforms will only apply to gains accruing after 1 July 2027. How have the reforms affected the market and investors? When the changes were announced, Australia’s property market had already been cooling, driven by a combination of cash rate hikes, housing affordability constraints, the Middle East conflict, and cost-of-living pressures. But the Federal Budget reforms dampened the market even further, with auction clearance rates slipping to levels worse than during the pandemic, and investor confidence dropping. One survey of more than 1,400 Australian investors found that more than 80% believed residential investment property had become less attractive following the 2026 Federal Budget changes. At the same time, 51.5% said they planned to hold their existing investments and wait to see how the proposed legislation evolves. Overall, the survey offers a useful snapshot of investor sentiment, although it should not be taken as representative of every Australian property investor. Key shifts in strategy Since the announcement, there have been early signs that some investors are reconsidering where and how they invest, although it is too soon to say how the reforms will reshape the broader property market over the long term. New builds could attract more attention With negative gearing limited to new builds from 1 July 2027, there are signs that some investors are pivoting towards newly constructed properties. Data from property fund manager Oliver Hume shows the proportion of new-build sales to investors in Victoria has risen above 40 per cent for the first time since December 2024, for example. Experts say investors will likely switch to new units or houses on the outer city fringes, while suburbs in the middle of cities could experience a decrease in stock, potentially resulting in higher rents . Holding or grandfathering existing assets Investors with established properties purchased before 12 May 2026 may choose to retain those properties, as they are exempt from the negative gearing reforms and can continue to access the existing tax treatment that applies to grandfathered properties. These investors can keep negative gearing the property against their wage income and retain the full benefits until they sell. Cash flow could become an even bigger consideration Historically, negative gearing enabled investors to offset losses on established investment properties against their taxable income. But under the changes , investors purchasing established properties would no longer receive immediate tax relief on those losses. The changes may prompt some investors to focus more heavily on rental yield , cash flow and long-term returns when assessing investment opportunities. As a result, positively geared properties could become more attractive relative to investments that rely heavily on tax concessions to support returns. Some may also look for properties with the potential to transition to positive gearing over time as rental income grows. What about the changes to SMSF borrowing? In addition to the CGT and negative gearing reforms, there are new rules around self-managed super fund (SMSF) borrowing. From 10 August 2026, SMSFs can no longer use Limited Recourse Borrowing Arrangements (LRBAs) to buy residential property. Current LRBAs are grandfathered. SMSFs can still purchase residential property outright using cash , and LRBAs can be used to acquire business real property. The changes have been met with mixed reviews among investors, and some critics questioning whether it would make it harder for Australians to build retirement wealth . Some experts also believe that the changes could increase the appeal of commercial property among SMSF investors, although SMSF property investment can involve complex lending, tax and superannuation requirements, so specialist financial, legal and tax advice is particularly important. Considering an investment property purchase? The changes in the budget mean investors may need to think differently about the type of property they purchase, its cash flow and how the investment fits within their broader financial plans. While we can’t provide tax or financial advice, we can help you understand the lending side of the equation. We can review your borrowing capacity, compare suitable loan options and help you understand how different property and loan scenarios could affect your repayments and overall finance structure. If you’re considering your next investment property, get in touch! We can help you explore your finance options so you can make your next move with a clearer understanding.

Get EOFY ready as a property investor

May 20, 2026
30 June is fast approaching. For property investors, it’s a natural time to review your position and get records in order before the financial year closes.