How to navigate the post-Budget property market

You might be surprised to hear me say this, but for investors and home buyers alike the Federal Budget hasn’t really changed that much.

But that comes with the caveat that buyers are able to ignore horror headlines, short term market movements and the dishonesty of some spruikers.

Not exactly the fall of Rome

The budget brought a tidal wave of alarmist reports filed by reporters overanalysing one week’s auction results or claims by little known economists who should have known better.

I did have to laugh at one TV report which screamed about a “plunge in property prices” then put up a graphic with “expert predictions” (from stock market analysts) showing mostly three percent falls over an indeterminate timeframe.

It was all a little ridiculous, framed around the idea that house values move like coal prices and that changed tax treatments for new investors will undo Australia’s most valuable asset market.

What is happening in property right now?

Expectations for real estate prices were largely set during the Covid era “emergency low” mortgage rates in the 2.2 to 3.0 per cent range.

Market sentiment and the actions of some rogue sellers (see below) kept momentum elevated during most of the last five years, with the big exception of Melbourne.

Property prices can prove sticky in the face of changing conditions, but just like 2022, rises in interest rates this year proved decisive in Sydney and were starting to have an impact elsewhere.

Be careful who you trust

While some of the media coverage bordered on hysterical, an equally false picture created on Instagram was evaporating.

Regular readers will recall I frequently warn investors that there are two types of buyers agents: those with a firm background in real estate who operate an advice model on behalf of clients and others who do not.

This latter group are known in the industry as “data driven agents” or “borderless agents” and their rise was always going to end in tears.

Their operations have been characterised by big social media spending, claims their unique software has uncovered “hidden hotspots” and high-pressure sales tactics to drive high volume sales.

In reality, most of the agents were young, armed with a six-week certificate and little practical experience. They often worked for brands run by highly geared operators pushing agents to create sales to keep their business growing.

Typically, agents didn’t even inspect the properties they were recommending. Clients often received a dubiously positive valuation just months after their purchase and were then advised to use their equity, apparently generated overnight, to buy again.

Our firm had assisted quite a few of these clients, helping them exit terrible investments in Perth, the outer suburbs of Melbourne and some regional centres.

My contacts across Australia have told me stories of being outbid by these data-driven agents by amounts equivalent to 20 per cent beyond a realistic valuation.

For investors, the fall of these agents is undoubtedly a good thing.

How buyers should navigate the new landscape

For people susceptible to sweet sounding pipe dreams or high-income earners, often advised by accountants or financial planners, to use property as tax reduction strategy, the budget has changed things.

And that will drive short term market outcomes.

As my colleague, Michael Kimbel related to me, “I expect the market to be flooded with poorly performing stock this year as badly advised investors throw up their hands and say they’ve had enough.”

“In some regional centres and outer suburbs, the false market created by these overnight experts will unwind.”

Home buyers and investors alike will need to exercise caution before buying.

Investor sentiment has been affected. Market declines driven by poor sentiment are hardly unusual.

These declines happened under different tax regimes and reversed after short term falls.

Moving forward, it is fairly certain most markets will record a downward trend this year.

But any falls will be exacerbated by a surge in C and B grade stock being offloaded by disillusioned owners, masking the strength of the underlying market.

As an example, while a suburb or regional centre may record a 7 per cent fall in median prices, the real values of A-grade units and detached family houses may prove static or down only marginally in 2026.

The second likely outcome is for new properties. The government is claiming their policy change will see investors shift their focus and drive growth in new construction. I doubt this will prove true but even if it does, any impact will come years into the future.

Most newly built units are constructed on second rate locations and many come on to the market with building defects.

Off-the-plan apartments have typically been a graveyard for building investor wealth.

A market of winners and losers

A picture of how the market will travel can be seen in Victoria’s experience over the last four years, where land tax changes crimped investor demand.

In 2025, good conditions bolstered by falling interest rates saw detached houses record growth of 5.6 per cent. This year, rising rates have seen prices stall ahead of a likely small decline.

But for investment grade properties, just eight percent of transactions each year, good sales results are still the norm.

If there are declines in property values, this will only encourage Australia’s army of latent first home buyers and see-through-the-cycle investors to pounce.

That brings a stabilising effect which will limit and ultimately reverse any market falls.

Smart buyers should start readying themselves now and focus their searches on the fundamentals.

Those fundamentals remain as they have always been: properties with scarcity value, in demand from a variety of different buyer types but undersupplied by the market.

For the most part, that means established property in well-serviced metro areas and larger regional centres.

For well advised and patient buyers, the next 12 months should offer some good long term prospects.