Property investors are being nudged toward riskier bets, and it isn’t the Reserve Bank driving it this time. The Property Investment Professionals of Australia (PIPA) says this year’s negative gearing and capital gains tax changes are pushing money toward regional units, unusual title types, and other cash-flow-heavy assets, while a separate 10 August deadline is pressuring self-managed super fund trustees into decisions some may come to regret. Auction clearance rates climbed to a seven-week high in the same week, a reminder that buyer demand hasn’t gone anywhere even as the policy ground keeps shifting under everyone’s feet.
Why Tax Reform Is Pushing Property Investors Toward Riskier Bets
PIPA chair Cate Bakos says the government’s negative gearing and capital gains tax (CGT) reforms have changed where investor interest is concentrated. First-time investors can no longer access negative gearing tax offsets unless they buy brand-new property, and Bakos says that shift is triggering a surge of interest in regional locations, small units and apartments, challenging title types, commercial assets, and other cash-flow-focused investments.
Positive cash flow has become a bigger drawcard now that the tax offset is gone for established property, Bakos said, because it helps service debt and offers resilience against rising rates. Her central warning is that chasing yield at the expense of capital growth risks undermining long-term outcomes, since capital growth remains the part of the equation that actually builds wealth over time The Adviser.
Bakos also flagged that periods of policy change tend to attract promoters pushing the boundaries of risk, with some of the stock being touted carrying internal floor areas that fall short of lending policy or unusual title types that require a bigger deposit than a standard residential purchase. Lenders are adjusting their own processes in response too: Westpac’s updated credit policy, in effect since 29 June, now requires brokers to demonstrate a client can service a loan without relying on the negative gearing or rental income tax deduction benefit, running eligible applications through an updated serviceability calculator, and ORDE Financial has made a similar change Broker Daily. Because these changes touch both tax treatment and asset selection, anyone reassessing an investment loan or property strategy is best placed working through the detail with their broker and accountant before committing.
Whether the strategy would still make sense without the tax angle. Bakos’s point is that cash flow alone doesn’t build wealth, so an asset chosen mainly because it produces income under the new rules still needs to stand up on fundamentals like location, title type, and long-term growth prospects. A broker or accountant can help separate what the tax change makes attractive from what actually suits the underlying goal.
How the SMSF Borrowing Deadline Is Fuelling Pressure Sales
New limited recourse borrowing arrangements for residential property inside self-managed super funds will be banned from 10 August 2026, and Momentum Media director Phil Tarrant says that hard date is now being used as a sales tool. Buyer’s agents are telling clients to “hurry up” and buy before the cut-off, he said, even when the strategy may not suit their circumstances The Adviser.
Tarrant also pointed to a knock-on effect inside the lending process itself. Brokers are working under intense time pressure to get deals across the line before the cut-off, and some lenders may be taking a looser approach to asset valuation than usual as volumes spike. Once new SMSF residential loans stop being written, he said competition for that lending will thin out, meaning pricing on existing SMSF loans could start moving independently of the RBA, particularly for lower-quality assets that struggle to refinance.
Refinancing of existing SMSF property loans remains unaffected, since the ban only applies to new arrangements going forward. For trustees still weighing a purchase before the deadline, the detail that matters most now is whether contracts can genuinely exchange in time, not the headline appeal of getting in before the door closes. Given the trust deed, fund balance, and compliance considerations involved, this is a decision worth working through with a broker and accountant rather than a deadline alone, and it’s a natural point to compare how SMSF lending stacks up against other structures.
Auction Clearance Rates Jump to a Seven-Week High
The combined capital cities’ preliminary auction clearance rate rose to 54.8% in the week ending 12 July, the strongest result in seven weeks and the first time above 50% in three weeks, up from 49.8% the week before Cotality. The lift came even as the number of auctions held fell 8.7% to 1,318, itself 8.0% below the same week a year earlier.
Sydney recorded the biggest swing, with its preliminary clearance rate climbing to 57.5%, its best result in ten weeks and well above the 47.3% low of three weeks ago, although volumes there fell sharply. Melbourne strengthened to 56.2%, its best early read in four weeks, while Brisbane nearly doubled its clearance rate to 43.0% from a weak 23.8% the week before. Adelaide jumped to 59.1% from 45.7%, and Canberra held at 44.9% across 60 auctions.
A stronger clearance rate on fewer auctions points to buyers competing harder for the stock that is on offer, rather than a simple surge in overall activity. It’s a useful counterweight to the more cautious tone coming out of the rate and tax debate elsewhere this week, and a sign that committed buyers are still transacting despite the uncertainty.
Rental markets are telling a more divided story. Sydney house rents jumped 6.3% over the June quarter to a record $850 a week, the largest quarterly rise in four years, while Melbourne, Perth, and Adelaide rents barely moved despite vacancy sitting near 0.4-0.5% in some of those cities Property Investment Professionals of Australia. A low vacancy rate on its own doesn’t say much about where rent is actually heading; which city a landlord or tenant is in matters just as much as how tight that city’s rental market looks on paper.
Lenders Keep Cutting Rates Even as Another Hike Isn’t Ruled Out
The RBA has held the cash rate at 4.35% since its June meeting, following three increases earlier in the year, and the big banks remain split on what comes next. Westpac is the lone major still forecasting further hikes, while other forecasters lean toward a hold through the rest of 2026. That split hasn’t stopped lenders from competing hard on price regardless of where the cash rate ends up.
Eighteen lenders have reduced at least one variable home loan rate since the RBA’s last hike, according to Canstar data reported by The Adviser. Bendigo Bank trimmed the headline rate on its lowest variable product for refinancers by 0.15 percentage points to 5.89%, joining a group of 15 lenders now advertising a variable rate under 5.90%. At the sharper end of the market, smaller lenders including LCU and Pacific Mortgage Group are pricing variable loans around 5.69%, with 40 lenders now sitting below 6% The Adviser.
Fixed rates have moved further still. Across five lenders that cut fixed pricing this week, the average reduction was 0.22 percentage points, with one lender going further and cutting certain fixed terms by up to half a percentage point. Canstar puts the average owner-occupier variable rate on the market at around 6.67%, meaning plenty of room remains between the sharpest offers and what most borrowers are actually paying. On a $600,000 mortgage, a further 0.25 percentage point rise in the cash rate would add roughly $92 to monthly repayments, illustrating how much is riding on which forecast turns out right.
Flair Finance director Kirsty McKinnon said out-of-cycle rate changes have become a regular feature of lender conversations, regardless of the uncertainty around the RBA’s next move. She said many of this week’s cuts reflect lenders chasing volume rather than a shift in funding costs, and that the more useful question for borrowers isn’t whether to fix, but what certainty they actually want from their loan structure.
Key Takeaways
- PIPA chair Cate Bakos warns that negative gearing and CGT reforms are pushing first-time investors toward regional units, challenging title types, and other yield-focused assets, and cautions that cash flow alone doesn’t build long-term wealth.
- Westpac and ORDE Financial have updated their serviceability calculators so investor applications are now assessed on whether a loan can be serviced without the negative gearing benefit, meaning pre-reform borrowing estimates for negatively-geared clients may no longer hold.
- The 10 August deadline on new SMSF residential borrowing is fuelling deadline-driven pressure tactics from some buyer’s agents, according to Momentum Media director Phil Tarrant, with existing SMSF loans still able to refinance after the cut-off.
- Auction clearance rates hit a seven-week high of 54.8% in the week to 12 July, led by a ten-week high of 57.5% in Sydney, even as overall auction volumes fell 8.7%.
- Eighteen lenders have now cut variable rates since the RBA’s last hike, with Bendigo down to 5.89% and 40 lenders sitting below 6%, despite the cash rate holding at 4.35% and Westpac still forecasting further hikes.
- On a $600,000 mortgage, a further 0.25 percentage point cash rate rise would add roughly $92 to monthly repayments, underscoring the gap between the sharpest advertised rates and what most borrowers are still paying.