Westpac now sees a 2% national price fall this year and a 20% turnover slump as buyer sentiment cracks

This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.

This article is general information only and does not constitute financial, tax or investment advice.

The June round of housing data has done something the March quarter never quite managed. It broke consumer conviction about capital growth. The Westpac-Melbourne Institute Index of House Price Expectations fell 14.9% to 128.2 in June, its sharpest one-month drop in nearly three years and the first print below the long-run average since mid-2023. The June 2026 Westpac Housing Pulse revised the 2026 national price call to a 2% fall and pencilled in a 20% collapse in market turnover as investor activity retreats ahead of the budget's negative gearing reset.

For a leveraged landlord, this is not a signal to sell. It is a signal to know exactly what the grandfather clause is worth and what the next 12 months of forecast risk look like against a portfolio that already runs at a 4.35% cash rate.

The sentiment print, one layer down

The headline number is the Consumer Sentiment Index at 80.6, a 2.9% monthly fall and a level that has only been seen briefly in the deepest cost-of-living low points of the last two years. Sentiment surveys tend to be noisy month to month. Not this month. The sub-indices that matter for landlords all moved together.

• House Price Expectations: 128.2, down 14.9%, first print below the long-run average of about 130 in nearly three years.
• Share of consumers with a view who expect prices to rise: 52%, down from 66% in May.
• 'Time to Buy a Dwelling': 81.1, up 12.6%. Buyers are seeing an opening. Sellers are not.
• Time to Buy a Major Household Item: 86.4, up 0.9%. Discretionary spend is still cautious.

Matthew Hassan, Head of Australian Macro-Forecasting at Westpac, tied the sentiment turn directly to the May 12 federal budget. The 14.9% fall in expectations is not about the RBA. The cash rate has been sitting at 4.35% since the May 5 hike. The catalyst is the negative gearing and CGT reset that comes into force on 1 July 2027, which most consumers have finally digested three sitting-weeks after the announcement.

What Westpac now forecasts

The June Housing Pulse is Westpac's fourth revision to its 2026 outlook since November. Each revision has been in the same direction. The June round now sits at:

• 2026 national prices: -2% for the year. Given first-half gains before the June turn, that leaves calendar 2026 broadly flat.
• Sydney and Melbourne: material falls, deeper than the national number, with the June quarter already down 3.2% and 2.6% respectively on Cotality's June HVI read.
• Brisbane, Adelaide, Perth: growth slowing sharply but staying positive for the year.
• Turnover: down about 20% year on year as investors pull back from established stock in anticipation of the 1 July 2027 tax reset.
• Investor loan share: expected to unwind from the March 2026 record of 41% of new lending as new-purchase investor activity thins.

The 20% turnover number is the one to sit with. A 2% national price fall in a market that turns over normally is a routine peak-and-pause year. A 2% fall on a 20% turnover collapse is a market where the marginal buyer disappears, days on market lengthen, and price discovery gets slippery. That is the environment a landlord's next refinance revaluation will land in.

What the grandfather clause is actually worth

The budget legislation grandfathered residential investment properties held on or before 7.30 pm on 12 May 2026. From 1 July 2027, three things change for properties acquired after that cutoff:

1. Rental losses on the new-acquisition property can only offset other residential property income, including capital gains from other residential properties. They can no longer be applied against salary and wage income.
2. The 50% CGT discount is replaced with cost-base indexation using CPI, plus a 30% minimum tax rate applied to the resulting real gain.
3. The interaction between the two rules means quarantined losses that accumulate after 1 July 2027 take longer to be recouped through capital gains, because the gain itself is now measured against an indexed cost base rather than a nominal one.

Grandfathered holdings keep the current rules for as long as they are held. If a grandfathered property is sold, the entitlement does not transfer. If a grandfathered investor buys another established property after 12 May 2026, that new property sits under the post-1-July-2027 regime. There is a strong policy incentive baked in to hold.

For an investor already in the pool, the next 12 months are the last window in which the following moves happen under the current tax settings:

• A refinance that draws equity on a grandfathered property to invest in shares or a business remains fully deductible under the existing negative gearing rules.
• A sale of a grandfathered property realises the 50% CGT discount on gains accrued to sale date. A sale after 1 July 2027 loses that discount on any gain attributable to the post-1-July-2027 period.
• A depreciation schedule started on a grandfathered property continues under the current Division 40 and Division 43 rules.

These are not urgent moves. They are planning moves. They deserve to be modelled before the second half of 2027 rather than in the last quarter of it.

The refinance question, priced against a falling market

A leveraged landlord's most immediate question is not the CGT reset. It is what the June turn does to lender revaluations through the second half of 2026.

Sydney values on Cotality's index sat at their November 2025 peak nine months ago. The June quarter took another 3.2% out of that peak read. For a landlord who bought a $1.2 million Sydney investment property at the peak with an 80% loan-to-value ratio, the June print alone erased about $38,000 of equity in three months, on top of earlier softness. Where the property was cross-collateralised against a home to reach a 90%+ LVR at settlement, the buffer is materially smaller.

Lender revaluation cycles typically run twelve months out from origination, or triggered by a refinance request. That means the July and August 2026 refinance queue is being priced against equity positions that no longer match settlement, and the September to November refinance queue will be priced against a further six weeks of the same trend if the Westpac forecast holds. The practical response is to run a rate review inside the July to August window on any variable investor loan sitting more than 40 basis points above the sharpest advertised rate. The revaluation risk in October is worse than the revaluation risk in July.

Rents are doing something different

The June HVI print tracks capital values. It does not track the cash-flow side of the ledger, which is running in the opposite direction.

• Cotality's June 2026 read has national annual rent growth at 5.9%, the largest 12-month reading since the year to September 2024.
• SQM Research has advertised rents up 7.8% year on year on the June update.
• The national vacancy rate sits at 1.2%. Perth, Brisbane and Adelaide are all sub-1%.
• Gross rental yields across the combined capitals have edged up to about 3.45% on Cotality's read, the highest since mid-2025.

For an established grandfathered landlord, the split market is a quiet positive. Values are softer, but the rent side is doing more work than at any point in the last two years, and yields are expanding into that softness. The cash-flow gap that a leveraged investor has been closing since 2022 is finally moving in their favour.

The hold, sell, refinance calendar for the second half of 2026

The forecast set for the next six months is unusual. Sentiment has turned. Forecasters are catching down. The RBA is on hold at 4.35% until at least 11 August 2026, when the next Statement on Monetary Policy will refresh the outlook. The budget-driven 1 July 2027 reset is running down its clock.

For a portfolio landlord holding grandfathered stock, the second half of 2026 is best used to:

1. Model each holding's expected 12-month equity position against a further 1% to 3% decline in Sydney and Melbourne, and a slower trajectory in Brisbane, Adelaide and Perth.
2. Review variable investor rates in the July to August window before revaluations tighten. Propkt's rate compare tools surface the sharpest advertised rates on the market against the current loan.
3. Confirm the depreciation schedule on each property is still running its Division 40 pool correctly under FY26 rules, and that the quantity surveyor report is up to date if renovations have occurred since acquisition.
4. Hold rent reviews to the market. National rent growth is running well above wage growth of 3.3%. Where the current rent is more than 5% below fair market rent, running a mid-lease increase inside notice-period rules is straightforward and lifts pre-tax cash flow immediately.
5. Delay any material new-acquisition decision until after the August SoMP, unless the acquisition is a new build. New builds retain full negative gearing treatment under the May 12 budget and remain the one segment the reset does not close down.

The June sentiment print is the moment consumer conviction cracked. The Westpac Housing Pulse revision is the moment forecasters caught up. Neither number changes the fundamentals for a grandfathered investor holding rented stock. They change the calendar. That is worth planning around now, before the second half of 2026 quietly closes the window.

Propkt helps Australian landlords track rent, expenses, depreciation and refinance windows in one place, so the calendar work stays visible instead of arriving as a surprise at tax time.