2GB with John Stanley: Softening Markets, Tax Changes & What Comes Next

On 2GB Nights with John Stanley, Peter O’Malley from Harris Partners joins the program to unpack the clear softening emerging across Australia’s property market. With weak auction clearance rates, falling buyer confidence, and proposed changes to negative gearing and capital gains tax dominating headlines, the conversation explores what could lie ahead for prices, investors, and renters.

They also discuss:

•  Weekend auction clearance rates across Sydney, Canberra, and Brisbane — and what they reveal about demand 
•  Why this downturn feels tougher than 2020 and comparisons to the 2018 market correction 
•  Uncertainty around legislation timing and why policy detail matters 
•  The dangers of paying a premium for brand new property and “new property syndrome” 
•  How to properly assess off-the-plan purchases against the broader market 
•  Negative gearing vs positive gearing and the impact on borrowing capacity 
•  Why rents can continue rising even as property prices soften 
•  Melbourne as a case study in how policy settings can reshape both prices and rental markets

As always if there is a specific topic you would like for us to cover, please reach out and let us know!    

Transcript

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Clearance Rates Point To Downturn

SPEAKER_03 0:15

Each week we bring you a review of the uh weekend in real estate. And uh look, we had uh the clearance rates this weekend, obviously much smaller numbers in Brisbane and Canberra, but in Sydney 55 percent, Canberra 49 percent, Brisbane 22 percent, they're very low clearance rates, and they fit in to this uh picture of a softening market. And prices uh virtually everyone is now saying prices are starting to track down. We don't know where this is going to go. So I thought I'd check in with an overview on this. Peter O'Malley joins us regularly here from uh Harris Partners. I spoke with him earlier this evening. Uh good evening to you, John. Well, it's obviously very uncertain times in the real estate market, but this downturn that we're talking about now, certainly in terms of prices, this has been certainly we seem to have been tracking it here for a couple of months.

SPEAKER_02 1:01

Oh, that's right, John. I think this current downturn the Sydney market's experiencing is the greatest downturn since 2018 when the Banking Royal Commission was taking place. It's probably now a tougher market than it was in 2020 during the pandemic because we came out of the pandemic uh fear in the property market with low interest rates and sort of free cash handouts, if you like, to the economy. So it bounced very quickly at that time. Whereas uh three interest rate hikes already this year, rising unemployment, um, a market that is losing confidence, um, there's no doubt it's challenging for vendors out there.

Budget Changes And Market Confidence

SPEAKER_03 1:39

Yeah. So we've got these changes in the budget. We still don't know. The legislation is going to go through the Parliament, we're told next week. They do send with the numbers in the the upper house to get whatever changes are put forward through. But they are talking about some tinkering, but it doesn't sound like there'll be much change to what they're proposing in the property area.

SPEAKER_02 1:58

That's right. Um it sounds like start-ups might get some relief, but property is going to uh cop it as it was delivered on budget night, and people need to deal with that accordingly. Um and if they want to see these uh changes repealed, well I guess they'll be voting for the opposition because they've promised to repeal the measures in the budget, and that sets up a political dynamic, of course.

SPEAKER_03 2:21

Yes, of course. Just just from our our point of view of our listeners, particularly in Sydney and Brisbane. I know in Sydney uh there's a lot of focus today on what amounts to a brand new suburb right near the uh the Anzac Bridge. Uh they talk they're even talking about what what's what they're gonna name that suburb. It'll have transport, be a couple of caves from the city. Brisbane, of course, uh in the lead up to an Olympics, we'll see a lot of new developments. So if people have been thinking about investing, and the uh the whole purpose of this is to skew the investment in the direction of new property, are we gonna see people looking at some of these new developments with uh perhaps

New Build Bubble And Resale Risk

SPEAKER_03 2:56

a keener eye?

SPEAKER_02 2:58

We certainly are. I anticipate there'll be a price bubble in brand new product when this legislation goes through, John, because what the legislation and the removal of nev negative gearing does is it sends it's gonna send the entire uh property investment community, if you like, or the marketplace exclusively to developers and brand new products. So you're gonna have like a new property syndrome, just like you have a new car syndrome, as soon as you click the engine over and drive it off the lot, it drops 10% in value. I think you'll see a premium factored into brand new properties, um, and they're clearly targeted at people who want to negatively gear. And the moment you settle on that property as an investor, it will lose its brand new property status and will drop in price accordingly. So the advice that I will be giving my clients at the time when they're looking at purchasing a property off the plan is you must not compare the sale price with other sales in the development. You must compare the sale price with the broader market because if you buy and settle and need to resell, it's the broader market that you will need to sell back into.

SPEAKER_03 4:03

I I noticed this there's so much being written about all of this, and and a lot of it there's there's a lot of uh I've got to say, from what I can see, particularly on social media, some of the examples people are putting up seem very complex, and some of it uh duh does not add up. It's almost like people have got agendas both ways. But I did see people talking about buying off the plan where you put a deposit down, and then the uh the capital gains tax element kicks in once you settle. So you've got to take all that into account, don't you?

SPEAKER_02 4:31

You certainly do. And I believe that if you buy off the plan and resell before the property has been completed because you've enjoyed a uh a jump in price, the second sale is treated as an established property.

SPEAKER_03 4:46

See, this is where people are gonna get their head around it, and I know with new properties they say that the the sale of the new property, which can be negatively geared, they are saying that'll still be subject to the fifty percent capital gains tax uh discount, but then once it's sold, the person buying it won't be able to negatively gear it, and they'll have the the new capital gains tax arrangements as opposed to the person who buys it new.

SPEAKER_02 5:11

That's right. And when you start getting into that granular detail, that's why I I think we need to see what is passed through the Parliament, John. People going into that sort of depth at this stage are probably jumping the gun. Uh, we know that negative gearing is going to be changed, and we know that capital uh gains tax is going to be changed, but the fine detail for each circumstance is as you've just outlined, uh, will all come out in the legislation, and people just need to see what what happens with that legislation and how the market truly responds. Because everyone has a theory at the moment as to how the market will handle these changes, but we'll know in we'll know in due course.

Negative Gearing Explained Simply

SPEAKER_03 5:47

Okay. Two other quick ones if I can on this, and I'm going to talk about the rental market in a moment, but uh just just on this, because we talk about negative gearing. Negative gearing is where you are essentially purchasing a property uh and you are running it at a loss, and so you write off your losses. Positive gearing is where you buy something and your rent uh covers your outgoings and your mortgage. Um that's the ideal, isn't it? But is is it still possible to do that?

SPEAKER_02 6:13

Not really in Sydney, unless you've got a substantial amount of equity to put in up front. So positively geared means that um uh the the rental income services the debt that you have on the property and you have money left over. So when we come to negative gearing, what they're saying is that you used to be able to write the loss off against your wages and that will no longer apply. You can only write the loss off against future positively uh future positive gains in the rent. Yes. Um and if you hang on to the property for long enough, that will occur because you can carry your your losses forward as I understand it, um, but what it will do is it'll change the amount that investors can borrow to purchase property, John. And when you consider that investors uh overall are about 30% of the buying market at any time and their borrowing capacity has been reduced, this will flow through to property prices, there's no doubt. And in Australia, if there's one thing as a politician uh you need to be very careful about doing, and that is driving property prices down, um, because the public will react accordingly to that, and that's why this is uh you know so politically brave of what the Labour Party have done, particularly without a mandate, particularly without taking it to an election, because no one asked for this.

SPEAKER_03 7:29

Yeah, and and uh just on that uh I comment all the time here that we hear politicians the phrase they use is we want to make housing more affordable, but they never actually uh no one is what does that mean you want to see house prices go down? Because they want to try and send the message that those are out of the market, yeah, we're trying to help you, but they don't really want to tell the people who are in the market, yeah, we're trying to push prices down or flatten them out. It's it's it's a trick, isn't

Rents Rise Despite Falling Prices

SPEAKER_03 7:52

it? It's a trick.

SPEAKER_02 7:53

That's right. And the and look, the the best example for people to cast their eyes to is it if you want to look at a government that has made housing more affordable, that's Melbourne, because the state economy is depressed and property prices have performed accordingly, and then to try and fix their budget deficit in Victoria, they've overtaxed landlords who fled the market and property prices have crashed. Melbourne should be and historically has been the second most expensive capital city in Australia for obvious reasons. It's now f sitting around fifth or sixth, John, behind uh cities like uh Perth, Adelaide, uh Brisbane, Hobart, uh, Canberra, and Sydney, of course, because uh um uh the the the state government have effectively depressed the market there with their policies. Yeah, yeah, yeah.

SPEAKER_03 8:37

Well and rents, so so th that's that's the corollary of all this. We see prices going down and clearance rates down and the rest, but rents they're still they're still continuing to climb.

SPEAKER_02 8:47

Yeah, they're up 7.5% for the year already in Sydney, so we're uh not even at the halfway mark of the year, of course. So we're tracking for a 15% jump in rental prices in Sydney for 2026. And the thing about the negative gearing that I don't like is that that will stop investors buying established product, which which will see rents rise further and faster in price. And first home buyers that are renting and trying to save a deposit are going to find it even harder to do so now because they're gonna be paying out more of their would-be deposit in rental income to a landlord.

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