Hi all,
Welcome to our July update. This month we have latest updates on interest rates, the property market and an update on the Federal Budget. Please see below a link to Tom’s run through of the updates:
Interest Rate Update
In the RBA’s latest meeting in June they decided to leave the cash rate unchanged at 4.35%, this is the first hold for 2026. The meeting prior, in May, resulted in the years third rate increase of 0.25%.
Most major lenders, including ANZ, CBA and NAB, are predicting rates to hold for 2026 and then 2-3 rate cuts in 2027. Whereas Westpac are tipping 2 more rate increases in 2026.
Property Prices
The property market is continuing its struggles with falling values and less demand, Cotality’s (formally CoreLogic) monthly update shows a down month for Melbourne property, with prices down 2.6% in the last three months and 0.9% in the last 12 months.
Source: Cotality
The team at Performance Property are bullish on the Melbourne Market in the short to medium term being driven by population growth, low vacancy rate, lack of new houses being built and price to income ratios being at ~2018 levels. More information can be found in this video.
Federal Budget 2026
The budget proposed several tax changes that impact property investors in a move that aims to provide more properties to owner occupiers and to additionally slow property price growth. Some of the changes below:
Negative Gearing
- From 1 July 2027, negative gearing for established residential properties will be abolished for properties purchased after 7:30pm on 12 May 2026.
- Investors who acquire affected properties will no longer be able to claim rental losses against personal income like salary or wages. Instead, any net rental losses will be quarantined and may only be applied against future residential rental income or capital gains realised on residential rental properties.
- Current property owners, as well as purchasers who exchanged contracts before 7:30 pm on 12 May 2026, will be grandfathered and will continue to access negative gearing under the existing rules.
- The changes will not apply to eligible newly built residential properties. Investors in these properties will continue to benefit from both negative gearing and the 50% capital gains tax (CGT) discount.
Capital gains tax (CGT) discounts
- From 1 July 2027, the 50% CGT discount will be replaced with cost base indexation and a 30% minimum tax on net capital gains for assets held more than 12 months.
- The changes are not limited to residential property but apply to all CGT assets held by individuals, trusts and partnerships, including pre-1985 CGT assets.
- Transitional arrangements limit changes to gains arising on or after 1 July 2027, while prior gains remain subject to the current CGT discount and pre-1985 assets remain exempt before that time.
- Investors in new residential property may choose between the existing CGT discount or the new regime on disposal.
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