CBA is no longer tipping any house price growth this year. · Getty
The nation’s largest mortgage lender has revised down its expectations of any price growth in Australian real estate this year. Commonwealth Bank economists have rethought their projections as the property market faces “multiple headwinds” they believe will “hit home prices by more than expected”.
Heading into budget night with tax concessions for future real estate investors expected to be wound back, the major bank was relatively sanguine about the overall impact on prices. But it now says the tax changes have been thrown into a mix of negative sentiment that will likely see lower house prices.
“There has been a particularly noticeable shift in sentiment following the housing tax policy changes in the Federal Budget, adding to a deterioration that began in late 2025,” the bank’s senior economist Trent Saunders wrote.
“The tax changes have accelerated a slowdown that was already underway.”
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The bank economist pointed to higher interest rates, tighter financing conditions, and worsening sentiment as a turning point for the market in the near term.
“We now expect national dwelling prices to be flat over 2026, down from a forecast of 3% at Budget and 5% in March,” he wrote in a market note on Wednesday afternoon.
“We have also placed more weight on the downside scenario flagged on Budget night, where the long‑run policy drag on prices is closer to 5%, rather than our initial central estimate of around 3%.”
Commonwealth Bank was the last of the Big Four to officially inform brokers and clients that it was changing how it lends to investors in lieu of the ability to negatively gear.
Saunders also pointed to a belief that investors are unlikely to place much value on the ability to quarantine losses under the new rules as part of the bank’s revised forecast on price growth.
“Auction clearance rates have been falling since the RBA started its recent hiking cycle, price growth has continued to slow, and sales activity has softened. Tighter credit conditions are also likely to bring forward part of the adjustment by reducing borrowing capacity, particularly for investors,” he said.
PM pleads case for tax changes
Taxpayer backed first home buyer schemes that let new buyers purchase a home for as little as 2 per cent of the price are not enough on their own to get more people into the property market, the prime minister says, shrugging off calls to hit pause on contentious tax changes.
Federal parliament is continuing to debate looming tax changes that would limit negative gearing to new properties from July 2027, as well as axe a 50 per cent discount on capital gains tax to a rate tied to inflation.
“We know also that we needed to do more. We need to do more, because in spite of all of those programs we still were not doing enough,” he told parliament on Wednesday.
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“Too many young people will tell the story of turning up to an auction on a Saturday and simply being outbid by someone who has a partner at that auction, an investor, and the partner is every Australian taxpayer.
“If they’re in a bidding war at an auction, the investor knows that if they go for $20,000 more then that’s running off their tax, if they’re going to negatively gear that property, something that’s not available to the first home buyer.”
The changes – which controversially increase the tax burden across all assets classes – are set to be voted on in the lower house on Thursday.
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