As the Federal Budget is set to drop sweeping changes for property investors, Domain’s Chief of Research & Economics Dr Nicola Powell says the Australian housing market has entered a new phase – one marked by caution, divergence, and a reckoning with reality.
Heading into 2026, the Australian property market was riding a wave; prices had climbed through a long, uninterrupted run of quarterly growth and confidence was high.
Then April arrived, and in the space of a single month, the landscape shifted. As the Federal Government hands down a Budget that will directly reshape the investment property landscape, the timing could not be more loaded.
Domain’s Chief of Research & Economics, Dr Nicola Powell, has spent the past weeks tracking the data week by week, and her picture of April 2026 is one of a market at an inflection point.
“I think I describe April as almost kind of this month that created peak uncertainty.”
That uncertainty didn’t come from one direction, she says, it came from all of them at once.
Three rate hikes, a war, and a budget
The RBA has now delivered three consecutive rate hikes, the Middle East conflict has driven fuel costs sharply higher and inflation pressures that many hoped were fading have returned with renewed force. And now, a Federal Budget that every agent and investor in the country has been waiting on – with somewhat hesitance.
Dr Powell explains the cumulative weight of these forces on buyer psychology like this: “We’ve obviously had the escalation of the war in The Middle East that’s created an escalation in fuel costs. That’s going to have downstream impacts, and it’s obviously impacted inflation, but secondary impacts are yet to be felt in terms of what those higher costs are gonna do for fuel.”
The rate hikes alone represent a material shift in affordability.
“We’ve seen three back to back rate hikes. That is going to have a material impact on borrowing capacity, and that will play out in our housing markets with slower rates or negative price movement.”
And nobody, she says, predicted this sequence.
“I don’t think anybody, if you’d spoke to them in January, would predict where we are today with three back to back rate hikes … the prospects of another one for this year, and then a budget that’s really going to change the taxation outlook on investment properties.”
All of those pressures, layered on top of each other, have produced what Dr Powell calls an understandably cautious market.
“That layered with cost of living pressures, renewed inflation pressures … I think it’s very understandable why we do have a more cautious market now.”
Budget Day: a pause button on the market
For the real estate industry, the Budget release is the moment everyone has been bracing for and Dr Powell expects it to be a turning point.
We already know the 2026 Federal Budget is set to mark a significant shift in housing policy from a real estate industry perspective, with the Albanese government confirming changes to negative gearing that will restrict future tax advantages to new-build properties, while existing arrangements are expected to be grandfathered.
Alongside this, broader tax settings including capital gains concessions are being recalibrated as part of a push to redirect investor demand toward new supply rather than established homes.
Treasury’s overarching intent is to lift housing supply, improve affordability, and ease structural pressure on the rental market through increased construction activity and infrastructure funding.
For the real estate sector, the reform package signals a clear departure from long-standing investor-friendly settings and a move toward a market designed to favour new development and longer-term housing supply outcomes.
“It’s very clear that the budget is going to have some changes that are going to directly impact investors. So I do think that there’ll be an element of pausing …. and then waiting to see.”
That pause has been evident throughout April and into May. Buyers and sellers alike have sat on their hands, reluctant to commit without knowing the rules of the game and Dr Powell frames it as a near-universal market behaviour in times of policy uncertainty.
“When you ever have uncertainty and there isn’t any clarity for buyers and sellers to make their decisions, you tend to find those decisions don’t necessarily change. They’re just paused until greater clarity is reached. That always happens. What happens next will depend heavily on what the Budget contains and how investors interpret the fine print.
Clearance rates tell the story
The headline number from April is the clearance rate – and it’s stark. Across the combined capitals, clearance rates fell to 55.7%, the lowest since December 2024, and for the month of April specifically, the weakest since 2020.
Dr Powell had been watching the weekly data, so while she says the direction wasn’t a surprise, the scale was significant.
“Every capital city apart from Adelaide [now has] a clearance rate below 60%, [which] highlights the change we’ve seen.”
There’s a caveat worth noting. ANZAC Day complicated the April figures, with some states restricting auction activity. The proportion of auctions withdrawn rose to 17.6% nationally – 26.9% in Sydney alone, the second-highest on record. She attributes some of this to the long weekend, with sellers pulling listings rather than proceeding under restricted conditions.
But the broader trend shows that buyer appetite has pulled back.
“The April result for clearance rates… does have to be layered with the fact that we did have ANZAC Day… [but] I just think that just rapid deterioration in buyer appetite, really, and just this change in cautious nature from buyers.”
Sydney’s stock spike: A 15-year high If clearance rates are the mood indicator, stock levels are the structural signal. And in Sydney, the signal is unmistakable.
Total supply in Sydney has reached its highest level since 2011 and for the month of April specifically, new listings are at an all-time record high.
“We’ve seen a rapid change, I think, in the availability of homes. And ultimately… supply is starting to build, and the demand has pulled back.” The sequence matters because in periods of uncertainty, demand always moves first.
“Demand is always the element that reacts first. And demand pulls back, and then sellers react to that changing environment of selling and eventually pull back too.”
What this means practically is increased choice for buyers, at least in the short term, and more competition for sellers.
“I think that we’re starting to see a gear shift. It’s not unanimous, I think, across Sydney. But I think in those markets where we have seen a strong uplift in supply… it does show that conditions have shifted quite rapidly.”
The Domain House Price Report for the March quarter – the first full data set to capture the changed environment – shows Sydney and Melbourne recording their first quarterly house price declines since December 2022 and September 2024 respectively.
Dr Powell puts the speed of their response down to structural sensitivity: “Sydney and Melbourne react quicker to the change in the cash rate… They’re more sensitive to changes in the cash rate.”
Crucially, that March data doesn’t yet reflect the third rate hike and the full impact is still to come.
Meanwhile, Adelaide and Perth continue to outperform and Brisbane also holds up relatively well.
“The growth is no longer broad based, and I think momentum is much more concentrated in affordable sectors… Brisbane, Adelaide, and Perth… continue to lead. And I think it’s being supported by strong population, tight supply still, and also very tight rental markets as well.”
Adelaide’s rise has been particularly notable as it has now overtaken Melbourne in median house price, a historic first, and claimed its position as Australia’s fourth most expensive capital city for houses.
The city’s clearance rate also bucked the national trend in April, declining only marginally while remaining at its highest April level since 2023, outperforming every other major capital.
What comes next 2026 will be a year of slowdown says Dr Powell as the market is pricing in at least one more rate hike.
“I think we’ve got to brace that this year is going to be a year of uncertainty, and it is a year that the property market is gonna slow down… particularly Sydney and Melbourne are very… they’ve softened marginally, but they are on the brink of moving into a downturn.” Other cities, she believes, will hold up better – but even the stronger markets are decelerating.
“Whether we see that unravel across other capital cities in terms of negative movements in price, I think that some or other cities will still hold up firmer, but will record slower rates of price growth.”
For the industry, the Budget appears set to answer some questions while raising a new wave of uncertainty.
KEY DATA: APRIL 2026 SNAPSHOT
Combined Capitals Clearance Rate: 55.7% — lowest since December 2024; lowest April result since 2020
Withdrawn Auctions (National): 17.6% — highest since April 2020
Sydney Total Supply: Highest since 2011; April new listings at all-time record high
Sydney Withdrawn Auctions: 26.9% — second-highest on record
Sydney Vacancy Rate: 0.8% — record low, stable for third consecutive month
Melbourne Clearance Rate: Lowest since July 2022; lowest April result since 2020
Brisbane Vacancy Rate: 0.6% — record low, stable for third consecutive month
Adelaide Clearance Rate: Highest April result since 2023 — against national trend
National Vacancy Rate: 0.7% — record low
Sydney & Melbourne House Prices: First quarterly decline since Dec 2022 and Sep 2024 respectively
Adelaide House Prices: Now above Melbourne median for the first time on record Source: Domain Research, Monthly Market Insights April 2026 & House Price Report March 2026
