Welcome to our
August Newsletter

Australia’s property market continues to adjust to higher interest rates, affordability pressures and ongoing economic uncertainty shaping conditions for buyers and homeowners alike.

In many areas, conditions are becoming more favourable for buyers. Home values have eased, properties are taking longer to sell and auction activity is subdued, giving buyers more opportunity to negotiate.

A recent KPMG report suggests housing conditions may remain subdued through the rest of 2026, forecasting a 1.1% decline in national house prices before a projected recovery in 2027. Unit markets are expected to prove more resilient, with prices forecast to continue rising over the next two years.

Property investors are also navigating an evolving regulatory landscape. From 10 August, changes to SMSF borrowing rules will add a third clause to the definition on an acquirable asset. This means that only property that meets the definition of business real property is able to be financed through a loan within an SMSF.

Existing arrangements on property contracts that were signed prior to 10 August 2026 will remain grandfathered, although there is some uncertainty as to how many lenders and loan products will remain in the space once the changes are in place. Furthermore, residential property will still be able to be purchased outright using cash reserves of the SMSF only.

For those looking to buy this spring, having your finance in order is paramount. Chat to us now about organising pre-approval on your home loan. That way, you’ll be ready to jump in when you find your dream home or investment property.

Interest rate news

As widely expected, the Reserve Bank of Australia (RBA) has left the cash rate on hold at 4.35% at its latest meeting.

Australia’s annual headline inflation rose 3.8% in the 12 months to June, down from 4% in the 12 months to May, while underlying inflation held steady at 3.6%.

The softer-than-expected inflation data has many economists saying the cash rate may have peaked for the time being.

Several economists now expect the RBA to leave the cash rate unchanged for the remainder of 2026; however, the timing and direction of the next move remain uncertain.

If you’ve been with the same lender for some time, a home loan review can help you understand whether your current loan still aligns with your circumstances and objectives.

ASIC has also recently highlighted offset account errors that have affected some borrowers. There are a couple of ways you can check that your offset account is linked correctly, depending on your lender:

Via your banking app or internet banking
Via your statements (check whether your offset balance is reducing the amount used to calculate interest)
By contacting your financial institution

If you’re still unsure how you can check your offset account, your broker can help confirm that it is operating as intended.

Get in touch if you’d like to review your current loan structure and ensure it’s still aligned with your circumstances.

The next cash rate decision will be announced on 29 September.

Home Value Movements

Australia’s property prices fell 0.7% in July, marking the sharpest monthly decline since December 2022, according to Cotality.

Sydney and Melbourne continue to lead the falls, with prices dropping 1.4% and 1.2% last month.

The downturn has also spread to previously resilient capitals like Brisbane and Adelaide, where prices dropped 0.6% and 0.2% respectively in July.

“There’s been a really rapid deterioration in conditions in Brisbane, which I think has probably been the most surprising trend that we’ve seen over the last couple of months,” Cotality’s head of research Gerard Burg said.

“The shift is really evident in the total stock available for sale [in Brisbane]. Going back to February, it was around 25 per cent below the five-year average. It’s now sitting up around 6 per cent above that average level.”

Mr Burg said while property values would likely continue softening across the country, he expected more vendors to start pulling back from the market.

“When vendors look out at the market, they are seeing these challenging conditions and they’re probably thinking that they’ve missed the opportunity to sell at the market peak,” he said.

“If they have that choice to wait, they’re going to wait for the next cycle, once conditions improve, to put their home on the market.”

Meanwhile, regional markets saw prices fall 0.2% in July, the first decline in Cotality’s Combined Regional Index since January 2023.

Home Value Index

Ready to Buy?

While market conditions continue to evolve, buyers who are prepared and ready to act could be well positioned when opportunity comes along.

The busy spring buying season is fast approaching, and this year we’re likely to see plenty of motivated sellers. Taking the time to review your finance options beforehand can help you understand your borrowing capacity and be ready to act when the right property comes onto the market. Get in touch to discuss your finance needs.

Additional sources
Cotality Data Daily Home Value Index: Monthly Values
https://www.cotality.com/au/our-data/auction-results
https://www.realestate.com.au/auction-results/

Has your borrowing power changed?

You might be earning the same income as you were six months ago, but that doesn’t necessarily mean you can borrow the same amount. Understanding your borrowing capacity is an important step before you start your home-buying journey.

Your borrowing capacity is influenced by a range of factors, and it can change over time, even if your income hasn’t. Interest rate fluctuations, regulatory settings, credit card limits, living expenses, existing debts, and lender policies can all affect how much a lender may be willing to lend you.

If you’re planning to buy, refinance or invest, it’s worth understanding where you stand before you start making property plans.

Here are some of the key factors that could affect your borrowing capacity.

Higher interest rates can reduce borrowing power

Interest rates have been a major focus in 2026, with multiple cash rate increases affecting how lenders assess borrowing capacity.

When rates rise, the amount a borrower may be able to access can reduce, as lenders need to consider the impact of higher repayments both today and into the future.

When assessing a home loan application, banks also apply a stress test using your interest rate, plus a 3% serviceability buffer.

The Australian Prudential Regulation Authority (APRA) also requires banks and other authorised deposit-taking institutions to apply a serviceability buffer of 3 percentage points when assessing home loan applications. For example, if your home loan interest rate is 6%, the bank will assess you on a 9% rate. This allows lenders to test whether you can afford future interest rate hikes, but it also reduces your overall borrowing capacity.

High debt-to-income lending limits

From 1 February this year, the APRA introduced limits on high debt-to-income (DTI) lending. The main reason was to prevent a dangerous accumulation of risky lending.

The cap limits banks to issue no more than 20% of new mortgages to borrowers with total debt above six times their gross annual income. This applies separately to owner-occupier and investor lending.

The DTI changes do not directly reduce your borrowing capacity, but rather functions as a portfolio cap for banks. So, if your combined debts (i.e. your existing mortgage, car loan, credit cards, and new home loan) push your DTI ratio to six times your gross annual income or more, home loan approval may be harder if your chosen bank has reached its 20% high-DTI limit.

Credit card limits can affect your assessment

Having multiple credit cards with high limits can negatively impact your borrowing capacity, even if you rarely use them or carry no outstanding balance. That’s because lenders treat your total available credit as an ongoing financial commitment when calculating how much they’re prepared to lend.

If you have credit cards you no longer need, closing unused cards before applying for a home loan may help improve your borrowing capacity and strengthen your loan application.

Living expense calculations

The Household Expenditure Measure (HEM) is a standard benchmark used by lenders to estimate your living expenses. Banks compare your declared expenses against the HEM.

If your real spending is lower than the HEM yardstick, the bank uses the higher figure anyway, which lowers your borrowing capacity.

Existing debts can reduce borrowing capacity

If you have multiple debts to service each month (e.g. a car loan, a HECS-HELP debt, and buy-now-pay-later commitments), these may impact your borrowing capacity. Lenders will look at all committed debt when assessing you as a borrower.

Debt consolidation may also be an option in some situations, but it needs to be considered carefully. Rolling short-term debt into a longer loan term can reduce repayments while increasing the total interest paid.

Different lenders may reach different answers

Did you know lenders may assess borrowing capacity differently? Some might be more open to self-employed borrowers, or offer more flexibility around HECS-HELP debt, for example.

Navigating different lender policies and borrowing requirements can be complex. This is where working with a mortgage broker can help. We can compare lending policies across a range of lenders and help identify options that suit your circumstances.

So, how much can you actually borrow?

Whether you’re looking to buy, refinance or invest, we can help you understand your current borrowing capacity and explore your options. Your borrowing capacity can change as interest rates, lender policies and your personal circumstances change.

We may even be able to suggest ways to improve your borrowing capacity, so get in touch and let’s get started.

Home loan pre-approval:
What you need to know before house hunting this spring

When you’re planning to buy your first home or investment property, getting your head around all the jargon can feel overwhelming. One term you’re likely to come across is ‘conditional pre-approval’.

Many buyers think conditional pre-approval means they’re ready to purchase a property immediately. However, conditional pre-approval is only one step in the lending process. Buyers heading into spring should understand what still needs to happen before finance is formally approved.

What is conditional pre-approval?

Conditional pre-approval is when a lender agrees in principle to lend you a certain amount of money. It’s often referred to as pre-approval or approval in principle.

Conditional pre-approval doesn’t guarantee you a home loan. You still need to go through the loan application process and, once you find a property, your lender will still need to assess the property itself and may need to confirm that your financial circumstances have not changed.

Once your lender has assessed and approved your loan application, that’s when you’ll receive formal, or ‘unconditional approval’.

Benefits of pre-approval

While you technically don’t need to be pre-approved when purchasing a property, it’s still considered advantageous for several reasons.

❖ Understand your budget

Getting conditional approval gives you a realistic understanding of how much you can afford to spend on a property, and how much a lender is likely to be willing to lend you. This gives you confidence when bidding at auction or making an offer.

❖ Show sellers you’re serious

Pre-approval shows sellers that you’re genuinely motivated to purchase and not wasting their time. It may give you an edge over the competition during negotiations, as it indicates your offer is less likely to be withdrawn due to lack of financing.

❖ Be ready when your dream property comes along

By having your finance pre-approved, you can jump on opportunities when they arise. You may even be able to offer the vendor a shorter settlement period because your financial background check is already done, which may speed up the final approval process.

How long does pre-approval last?

Although conditional pre-approval is advantageous for a buyer, it doesn’t last forever. The validity of your pre-approval varies between different lenders and across different circumstances.

If you haven’t found a suitable property before your pre-approval expires, your lender may ask you to provide updated information or complete another assessment.

It’s also important to let your broker know if your circumstances change while you’re house hunting. A new job, additional debt, a change in income or higher expenses could affect your borrowing position.

Thinking about buying this spring?

Purchasing a property can feel overwhelming at times, particularly when it comes to understanding your finance options.

Working with a mortgage broker gives you access to guidance and support throughout the process, helping you make informed decisions with confidence.

If you’re considering a purchase on the horizon, we’d be happy to chat about your goals and answer any questions you may have.

Are property investors changing course after the new negative gearing reforms?

The Federal Government’s negative gearing and Capital Gains Tax (CGT) reforms represents a significant shift in how future property investments will be treated for tax purposes. For investors considering their next purchase, the changes may influence everything from the type of property they buy to how they assess cash flow and long-term returns. Legislated, many investors are reassessing their property purchasing plans and strategies.

The core reforms have now passed Parliament, although some of the more detailed implementation rules are still being finalised ahead of their commencement. If you’re looking to buy an investment property down the track, here’s what you need to know about the reforms and how they change the playing field.

What is changing?

On 12 May, Treasurer Jim Chalmers handed down the Federal Budget, which included major changes to negative gearing and CGT rules.

From 1 July 2027:

Negative gearing for residential property investments will be limited to new builds.
The 50 per cent CGT discount will be replaced with cost base indexation and a 30 per cent minimum tax rate on capital gains.

Properties held before the announcement (7:30pm AEST 12 May 2026) will be exempt from the negative gearing changes, while the CGT reforms will only apply to gains accruing after 1 July 2027.

How have the reforms affected the market and investors?

When the changes were announced, Australia’s property market had already been cooling, driven by a combination of cash rate hikes, housing affordability constraints, the Middle East conflict, and cost-of-living pressures.

But the Federal Budget reforms dampened the market even further, with auction clearance rates slipping to levels worse than during the pandemic, and investor confidence dropping.

One survey of more than 1,400 Australian investors found that more than 80% believed residential investment property had become less attractive following the 2026 Federal Budget changes. At the same time, 51.5% said they planned to hold their existing investments and wait to see how the proposed legislation evolves.

Overall, the survey offers a useful snapshot of investor sentiment, although it should not be taken as representative of every Australian property investor.

Key shifts in strategy

Since the announcement, there have been early signs that some investors are reconsidering where and how they invest, although it is too soon to say how the reforms will reshape the broader property market over the long term.

New builds could attract more attention.

With negative gearing limited to new builds from 1 July 2027, there are signs that some investors are pivoting towards newly constructed properties.

Data from property fund manager Oliver Hume shows the proportion of new-build sales to investors in Victoria has risen above 40 per cent for the first time since December 2024, for example. Experts say investors will likely switch to new units or houses on the outer city fringes, while suburbs in the middle of cities could experience a decrease in stock, potentially resulting in higher rents.

Holding or grandfathering existing assets

Investors with established properties purchased before 12 May 2026 may choose to retain those properties, as they are exempt from the negative gearing reforms and can continue to access the existing tax treatment that applies to grandfathered properties.

These investors can keep negative gearing the property against their wage income and retain the full benefits until they sell.

Cash flow could become an even bigger consideration

Historically, negative gearing enabled investors to offset losses on established investment properties against their taxable income. But under the changes, investors purchasing established properties would no longer receive immediate tax relief on those losses.

The changes may prompt some investors to focus more heavily on rental yield, cash flow and long-term returns when assessing investment opportunities. As a result, positively geared properties could become more attractive relative to investments that rely heavily on tax concessions to support returns.

Some may also look for properties with the potential to transition to positive gearing over time as rental income grows.

What about the changes to SMSF borrowing?

In addition to the CGT and negative gearing reforms, there are new rules around self-managed super fund (SMSF) borrowing.

From 10 August 2026, SMSFs can no longer use Limited Recourse Borrowing Arrangements (LRBAs) to buy residential property.

Current LRBAs are grandfathered.

SMSFs can still purchase residential property outright using cash, and LRBAs can be used to acquire business real property.

The changes have been met with mixed reviews among investors, and some critics questioning whether it would make it harder for Australians to build retirement wealth. Some experts also believe that the changes could increase the appeal of commercial property among SMSF investors, although SMSF property investment can involve complex lending, tax and superannuation requirements, so specialist financial, legal and tax advice is particularly important.

Considering an investment property purchase?

The changes in the budget mean investors may need to think differently about the type of property they purchase, its cash flow and how the investment fits within their broader financial plans.

While we can’t provide tax or financial advice, we can help you understand the lending side of the equation.

We can review your borrowing capacity, compare suitable loan options and help you understand how different property and loan scenarios could affect your repayments and overall finance structure.

If you’re considering your next investment property, get in touch! We can help you explore your finance options so you can make your next move with a clearer understanding.

Welcome to our August Newsletter