Trust history, not property headlines

For the week ending 5 July 2026, the combined capital city preliminary clearance rate sat at 49.8 per cent, marking the third consecutive week below 50 per cent. Auction volumes were also down, with 1,447 homes taken to auction across the combined capitals – 17.2 per cent fewer than the previous week and 19.3 per cent below the same week last year. Sydney’s preliminary clearance rate was 51.6 per cent, Melbourne’s was 54.5 per cent, Brisbane’s was just 23.8 per cent, and Adelaide’s fell sharply to 45.7 per cent.

On the surface, that looks ugly. Some pundits are referencing comparable figures to the global financial crisis (GFC).

But investors need to be very careful about confusing a weekly market indicator with the long-term direction of an asset class.

Auction clearance rates matter. Sentiment matters. Policy matters. Credit conditions matter. But none of them should be viewed in isolation, and none of them should be allowed to dominate an investment strategy built over decades.

That is the central point that too many people forget when the market gets noisy: property is not a week-to-week asset class.

It’s the property cycle

It is a long-duration asset class, driven over time by population growth, household formation, land scarcity, replacement cost, rental demand, income growth, infrastructure, credit availability, and supply constraints. Those fundamentals do not disappear because a winter auction weekend is soft.

The Cotality data itself shows why broad panic is the wrong response. Yes, combined capital values were down 0.6 per cent over the month, and Sydney and Melbourne were both negative. But over the past 12 months, combined capital values were still up 6.0 per cent. Brisbane was up 17.3 per cent. Adelaide was up 11.6 per cent. Perth was up 23.9 per cent.

That is not a market collapsing uniformly. That is a market fragmenting.

And that is exactly what serious investors should expect.

Markets do not move as one. Sydney is not Perth. Melbourne is not Brisbane. Inner-city apartments are not family homes in undersupplied middle-ring suburbs. Investor-heavy stock is not the same as owner-occupier stock. A weak clearance rate in one market does not automatically mean the death of Australian property as an investment class.

What we are seeing now is not simply a property cycle. It is a confidence cycle.

The federal government’s pre-budget and post-budget announcements have chipped away at sentiment. Changes to negative gearing and capital gains tax (CGT) settings have clearly made investors more cautious.

As a reminder (if you didn’t need it), from 1 July 2027, losses on existing residential investment properties purchased after budget night 2026 will only be deductible against residential property income (not personal income), while the 50 per cent CGT discount will be replaced by cost-base indexation and a minimum tax on capital gains.

Cotality has also linked weaker conditions to affordability pressures, higher rates, pessimistic sentiment, and the dampening effect of property taxation changes announced in the federal budget. Tim Lawless, Cotality’s research director, put it plainly: “The downward revision reflects a market that is changing rapidly.”

He is right. The market is changing rapidly. But changing rapidly is not the same as breaking permanently.

This is where investors need a historical perspective.

Trust your history

Australia has been here before. Tax settings have changed before. Negative gearing was effectively abolished for future rental property investors under Prime Minister Bob Hawke in July 1985 and reinstated in 1987. The 50 per cent CGT discount was introduced under Prime Minister John Howard in 1999. Property has moved through recessions, high-interest rate periods, credit squeezes, banking royal commissions, pandemics, inflation shocks, policy uncertainty, and repeated forecasts of collapse.

And yet, over long periods, Australian residential property has continued to perform.

The Reserve Bank of Australia’s own long-run analysis found that over the 30 years to 2015, Australian housing prices increased by an average of 7.25 per cent per year, although that average masked very different phases across the 1980s, 1990s, 2000s, and beyond.

That last point matters. Long-term growth has never meant a smooth ride.

There have always been five-year periods that looked ordinary, overheated, flat, euphoric or frightening depending on where you stood at the time. The 1980s were different from the 1990s. The post-1999 period was different again. The mining boom, the post-GFC period, the pandemic boom, and the rate-tightening cycle all created different market conditions.

Property does not move in a straight line. It never has. That is why counter-cyclical investing is so powerful – and so difficult.

Your mindset matters

When sentiment is strong, everyone wants to buy. When headlines are good, auctions are crowded. When prices are rising quickly, people convince themselves that taking action is safe because everyone else is doing it.

But when sentiment weakens, when clearance rates fall, when buyers retreat, and commentators start forecasting sharp falls, most people freeze.

That is often when serious investors start paying attention.

Counter-cyclical investing is not about blindly buying because the market is down. It is not about ignoring risk. It is not about pretending every property is a bargain. It is about understanding that softer conditions can create better buying environments for people who are well-capitalised, well-advised, and disciplined.

It can mean less competition. It can mean more negotiable vendors. It can mean better terms. It can mean the ability to buy assets that were previously out of reach in hotter conditions.

But it also requires selectivity.

The wrong asset bought in a soft market is still the wrong asset. Poor-quality stock, weak rental demand, oversupplied locations, structurally challenged apartments, and assets dependent purely on speculation should not suddenly become attractive because the headlines are gloomy. The opportunity is not “buy anything”. The opportunity is to buy well.

There is another reason the current panic needs context: Australia still has a structural housing problem.

The Australian Bureau of Statistics (ABS) reported that total dwelling approvals fell 1.1 per cent in May 2026 to 17,019, with private sector dwellings excluding houses falling 10.4 per cent. That is not the signal of a market about to be flooded with excess supply, although private sector dwellings (i.e. not units and town houses, which dragged the overall numbers down) did rise 2.8 per cent.

At the same time, the National Housing Supply and Affordability Council has pointed to structural factors limiting market housing supply, including restrictive regulation, tax settings, and productivity constraints.

It’s just madness to think that between a third to a half of the cost of all new builds goes to government taxes, compliance costs, infrastructure charges, and other expenses. In the 1970s, these fees made up about 10 per cent of house and land packages.

Remember the ’70s, when property was “affordable” for your average single-income working-class family. I remember. I grew up in one of these families in a suburb in western Sydney.

Most of these new build fees and costs go to the government. It’s a huge increase from the ’70s… and we wonder why we have an affordability crisis.

It’s pretty clear how we can fix this through driving supply: make it cheaper to develop. And how, you ask, can this be achieved? Cut spending that goes to the government. Sounds pretty simple, right?

Rental conditions also remain tight. Cotality’s June 2026 rental snapshot showed combined capital city median rents up 6.0 per cent annually, a national median rent of $705, and combined capital vacancy rates at 1.6 per cent.

That does not mean prices cannot fall. They can. In some locations, they already are.

It does not mean investors should ignore cash flow. They should not. It does not mean policy changes are irrelevant. They are absolutely relevant.

But it does mean the bigger picture is more nuanced than “clearance rates below 50 per cent, therefore property is finished”.

The question serious investors should be asking is not whether the government can interrupt the cycle. It clearly can. Policy changes can damage sentiment, change investor behaviour, reduce liquidity and alter the attractiveness of different asset classes.

A moment in time

The bigger question is whether this cycle of intervention will permanently buck the long-term trend of Australian residential property.

My view is no.

It may take time for the ship to right. It may be uneven. Some investors will be forced to rethink their strategies. Some markets will underperform. Some assets will struggle. Some speculative assumptions will be tested. And some buyers who overpaid during hotter conditions will have to sit through a period of discomfort.

But the fundamental long-term case for quality Australian residential property has not disappeared.

Australia still has population pressure. It still has a constrained supply. It still has expensive construction. It still has a deep cultural attachment to home ownership. It still has a banking system heavily linked to housing. It still has household wealth deeply tied to residential property, with ABS data showing total household wealth increased to $19.2 trillion in the March quarter 2026.

Even economists who are cautious on the current cycle tend to acknowledge the long-term strength of the asset class. AMP chief economist Shane Oliver has argued that real property price growth has averaged around 3 per cent per annum over the past 100 years, while also warning that Australia’s most recent property supercycle may be entering a different phase.

And that’s ok.

That is the balanced view investors need. Not blind optimism. Not doom. Perspective.

There will always be commentators calling the top. There will always be forecasts of major falls (remember the start of the COVID-19 pandemic, with calls of drops up to and over 20–30 per cent).

There will always be policy scares, budget shocks, auction slumps and confidence wobbles. Some of those warnings will be directionally right for particular cities, suburbs or asset types.

But investors do not build wealth by reacting emotionally to every weekly data point.

They build it by understanding cycles, buying quality assets, managing debt, maintaining buffers, focusing on rental fundamentals and staying in the market long enough for time to do its work.

For serious investors, the current environment should not be a reason to panic. It should be a reason to sharpen the pencil, reassess assumptions, and look harder for opportunity.

Because in property, as in every asset class, the best opportunities rarely arrive when everyone feels comfortable.

They arrive when the market is uncertain, sentiment is weak, and most people are too distracted by the headlines to see the long game.

Phillip Tarrant is CEO of Managed, a podcast host, investor and property commentator. Follow him on LinkedIn.

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