Melbourne Auctioneer Suggests Tax Rule Reversal Could Boost Home Values

Melbourne’s auction market continues to reflect cautious buyer sentiment, with a recent realestate.com.au result showing a 53.4% clearance rate from 380 reported auctions. That result came immediately before the Reserve Bank’s November monetary policy decision.

The RBA has since raised the cash rate by 0.25 percentage points to 4.85%, effective from 4 November 2026. It was the fifth rate increase this year, adding further pressure to borrowing capacity and mortgage repayments.

Interestingly, Melbourne’s auction market subsequently showed some improvement. Cotality reported a final clearance rate of 51.7% for the week ending 8 November, while realestate.com.au’s preliminary figures were stronger. Nevertheless, auction activity remains well below the levels recorded a year ago, indicating that conditions are still subdued overall.

Another major factor influencing the property market is the federal government’s reform of investor taxation. From 1 July 2027, negative gearing will generally be limited to newly built investment properties, while changes to capital gains taxation are also scheduled to take effect. Existing investments acquired before the May 2026 budget announcement receive transitional treatment.

For Melbourne’s western growth corridor, these changes could influence where investor demand is directed. New homes, townhouses and house-and-land packages may become relatively more attractive to investors if they retain access to negative-gearing benefits that are no longer available for newly purchased established properties.

However, the impact on property values is unlikely to be uniform. Reduced investor demand for some established properties could place downward pressure on prices, while stronger demand for new housing could support selected growth areas. Rental supply and construction activity will also be important.

For buyers, subdued auction conditions may provide greater negotiating power, but higher interest rates continue to restrict borrowing capacity. Investors will increasingly need to consider tax treatment, rental yield, finance costs and whether a property qualifies as new housing.

Overall, Melbourne’s property market is being shaped by several forces at once — higher rates, softer auction conditions and major changes to investor taxation. For Melbourne’s west, understanding these local and policy-driven shifts will be increasingly important when assessing future opportunities.