Misleading market downturn hides investor opportunity
With median property values declining nationally, investor confidence has taken a hit, but one economist is warning investors not to get caught up in the headlines.
PRD senior economist Diaswati Mardiasmo said the headlines pointing to a broad market downturn oversimplified what was really happening on the ground.
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She said that the downturn had largely been confined to the nation’s largest capitals, Sydney and Melbourne.
“Those are the two places that are seeing negative growth when it comes to prices, whereas in Brisbane, Perth, Adelaide, Hobart, we’re still seeing positive growth for both houses and units,” Mardiasmo said.
“But when I look at an aggregate of the whole capital city market, the downturn is largely contained within Sydney and Melbourne.”
She said that while investors’ portfolio strategies were previously influenced by the Reserve Bank of Australia’s (RBA) cash rate and interest rates, 2026 had seen a significant change.
According to Mardiasmo, changes to negative gearing, capital gains tax and self-managed super fund (SMSF) lending had added another layer of complexity for investors.
“It is definitely a time now where it’s not just about the cash rate, the cost of living or economic conditions.”
“There is a layer of complication in regard to the legalities and how you set up your investment portfolio in terms of asset class and purchasing structure.”
Along with changes in property markets, Mardiasmo said investors needed to understand the data that matters to them and how it fits into their strategy.
She said yields, vacancy rates, and project developments were important datasets to watch, but investors should pay close attention to how they affect their purchasing position.
“It’s not just about knowing the data set; it’s also knowing the financial structures that will work best for you, and not always following the traditional way of investing,” she said.
Mardiasmo said the changing conditions would require investors to lean more on professional expertise to guide their journey.
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Whether it was an accountant, lawyer, super advisor or home loan specialist, Mardiasmo said it was essential for investors to build strong connections with a range of professionals.
Where are the opportunities?
Mardiasmo said that for investors chasing strong returns, blue-chip suburbs just outside the inner-city regions could offer exciting opportunities.
She said that blue-chip suburbs had suffered the largest decline in recent months, opening the door for buyers who may have previously been unable to enter the market in these regions.
“It’s the places that people think they’ll never be able to get into,” she said.
For Brisbane, Mardiasmo said investors could find opportunities in Teneriffe, New Farm, and Ascot, as values have shifted the most in those suburbs.
Similarly, she said seaside suburbs such as Bondi in Sydney could also be a hotbed of opportunities for investors chasing value growth.
For those pursuing affordability and yields in Sydney, Mardiasmo said investors should look toward the northwest corridor.
She said the combination of affordability and slower transactions could give investors the chance to find value for money in their purchases.
Rebound dependent on rate decisions
Mardiasmo said that while rate cuts are currently tipped for 2027, the market could take longer than anticipated to begin to rebound.
While a cash rate cut would typically stimulate property prices, she said the current cost-of-living crisis and the prospect of further cash rate hikes could dampen the market further.
“It really does depend on what happens for the next three months and whether it’s going to be a hold and then a cut or whether there’s going to be a couple more cash rate hikes first,” she said.
“If we have a hold and then a cut, the rebound is going to be quicker, but if we have another cash rate hike or even two, then we’re going to need another period of a hold before a cut before it rebounds again.”
While there were three RBA meetings left in 2026, Mardiasmo said the decisions at the next two would significantly shape the property market’s outlook for the rest of the year and heading into 2027.
“I doubt they are going to do anything in December, so it depends on what happens in September and November as to how long until we see a rebound in the market.”
