After years of fierce competition, fast-rising prices and crowded auction weekends, the market is starting to shift. More homes are being listed for sale, they are taking longer to sell, and buyers are becoming increasingly selective about what they are willing to pay.
Nationwide, auction clearance rates have recently dipped below 50%, and in Sydney and Melbourne they have fallen to their lowest levels in years.
While that may sound like bad news for sellers, it can create opportunities for buyers. A softer market can mean less competition, more room to negotiate, and a better chance of finding the right home without feeling pressured to act quickly. So what is driving the decline, and what could it mean if you are looking to buy?
Federal Budget Tax Changes
In the recent federal budget, the government moved to reform negative gearing and capital gains tax, and those measures are now law. From 1 July 2027, negative gearing on residential property will generally be limited to new builds, and the 50% capital gains tax discount for individuals, trusts and partnerships will be replaced with cost base indexation and a 30% minimum tax rate on capital gains.
There is an important carve-out. Investments held at 7:30pm AEST on 12 May 2026 are generally exempt from the negative gearing changes, and the CGT reforms only apply to gains that accrue after 1 July 2027. The practical effect so far has been cooler investor demand, with many buyers pausing their plans, and that has flowed straight through to auction activity. The June newsletter has the fuller breakdown of what the budget changed. Some investors are choosing to improve what they already own rather than buy again, in which case the finance options for a renovation are worth a look.
Cautious Buyers And Differing Expectations
Buyer demand has softened, with many purchasers taking a more measured approach and spending longer weighing their options. At the same time, some sellers are still adjusting their expectations to current conditions, which widens the gap between what buyers will pay and what vendors hope to achieve.
That gap is showing up on auction day. With buyers approaching the market more cautiously, more properties are failing to reach their reserve and being passed in before moving to private negotiation.
Interest Rate Rises
Since the start of the year, the cash rate has risen three times. Lenders have lifted their rates in turn, which trims how much buyers can borrow and weighs on confidence. With fewer eager bidders in the room, vendors can struggle to reach their reserve, and more homes get passed in.
If you want a clear read on what you can borrow in the current market, that is a conversation worth having early. A home loan review can also tell you whether your current loan still suits your needs as conditions change.
What Falling Clearance Rates Mean For Buyers
A cooling property market can open doors. When fewer homes sell under the hammer, it usually means less competition, fewer emotional bidding wars, and more room to negotiate on both price and terms. Instead of making decisions under auction-day pressure, you may have more time to complete your research, secure finance approval and negotiate directly with vendors. Some sellers will also consider offers before or after auction if they are keen to achieve a sale.
Buyers now have more stock to choose from and less urgency in their decision-making.
Tim Lawless, Cotality Research DirectorFor buyers who have been sitting on the sidelines, shifting conditions are a chance to reassess. Every local market is different, but a softer backdrop can open doors that were firmly shut when competition was at its peak. We look at where that plays out in the opportunities a softer market creates.
Why Finance-Readiness Matters At Auction
Before you bid, it is worth understanding recent sale prices for comparable homes in your area and being clear on your finance position. Auctions are typically unconditional. There is no 'subject to finance' clause and no cooling-off period.
If the reserve is met and you are the successful bidder, you will generally sign the contract and pay a deposit on the day, usually 10% of the purchase price. From that point the purchase becomes legally binding, with ownership transferring at settlement. Getting your borrowing capacity confirmed and pre-approval lined up first is what lets you bid with confidence rather than hope. The strategy hub on things to ask a broker in 2026 is a good place to start.
