Ray White finds the affordable end losing ground since the May budget
The affordable end of Australia’s property market has lost its lead. Lower-priced homes are now falling in value faster than more expensive properties, as investors pull back following the federal budget’s changes to negative gearing and capital gains tax.
Ray White Group chief economist Nerida Conisbee (pictured) said the shift has occurred since the May 2026 budget. The budget substantially reduced the tax advantages of buying established investment properties after 12 May.
“This doesn’t mean expensive homes are suddenly booming,” Conisbee said. “What has changed is that cheaper properties are now falling faster.”
Affordable homes go from outperformer to laggard
The affordable end’s earlier lead was underpinned by the expanded 5% deposit scheme. From October 2025, the scheme offered lower deposit requirements, no income limits, and higher property price caps. That brought more first-home buyers into the cheaper house and apartment market sooner.
Ray White’s analysis compared values at the 25th and 75th percentiles across eight capital cities. In January, lower-priced houses were outperforming higher-priced houses by an average of 1.3 percentage points over three months, and units showed a similar gap.
By September, the gap had reversed. Higher-priced houses were outperforming by 0.18 percentage points, and higher-priced units by 0.32 percentage points.
Investors step back from their traditional patch
Cheaper established homes have long been an investor favourite, offering a lower buy-in and better returns from rent. Conisbee said the budget changes have pulled investor demand out of the same segment that first-home buyers had been supporting.
That retreat is already showing up in lending data. The number of new investor loan commitments fell 8.6% in the June quarter, the sharpest fall since September 2022, according to the Australian Bureau of Statistics. Conisbee said rising interest rates have added to the slowdown.
For first-home buyers, the result cuts both ways. Less competition from investors can make it easier to get into the market, particularly with a 5% deposit. The value of first-home buyer loans was 10% higher than a year earlier in the June quarter, ABS figures show, while the number of loans was unchanged. Once they own a home, however, they want values to rise like any other owner, and that is where the outlook gets more complicated.
No quick return for investors
Conisbee sees little prospect of a swift investor comeback. Her earlier modelling found rental yields would need to rise from around 3.95% to 5.15% to offset the budget changes. That would require rents to rise by approximately 30%, prices to fall by 23%, or some mix of both.
“Until that happens, cheaper properties are likely to continue underperforming, even when the broader market recovers,” she said.
