Low Melbourne clearance rates show investors "all but gone" from market

Melbourne auction clearance rates reflect investor exodus, property experts say Sat 4 Jul 2026 at 10:35am In short: Real estate experts say Melbourne's lowest auction clearance rate in five years shows investors' trust in bricks and mortar has been rattled by changes to negative gearing and capital gains tax in the federal budget. Buyer advocate Cate Bakos say investors have "all but left the market", but the Real Estate Institute of Victoria says the data needs to be viewed in context. What's next? The industry will be watching the results of today's auctions around Melbourne to see how vendors and prospective buyers are feeling. Yuki He bought her first investment property in Melbourne two years ago. She said she was confident she had made the right financial decision to invest in real estate. But then the federal government unveiled its May budget. "It directly hit my investment portfolio," she said. The government announced that from July 1 next year, negative gearing would be abolished for existing residential properties purchased after budget night, and a 50 per cent discount on the capital gains tax owed on any profit made from selling an investment property would instead be based on inflation from July 2027. Ms He said she was relieved to be spared the changes to negative gearing, and she supported initiatives to make housing more affordable for others. "I wouldn't say I am a fan of Labor but I do appreciate their courage to take this step because hopefully this is doing the job it's supposed to," she said. But she said with the change to capital gains and Melbourne's property prices now falling, she had some difficult decisions to make. "I'm losing money on the interest I pay every month, so what's the point of this investment?" Budget changes reflected in Melbourne's low auction clearance rate, experts say Last weekend Melbourne recorded its worst auction clearance rate in five years, with just 50.2 per cent of properties going under the hammer achieving a sale. While Melbourne's rate was the second best of the capital cities, according to property research firm Cotality, the result was on par with when the city was in the midst of 2021 COVID lockdowns. The Real Estate Institute of Victoria (REIV) CEO Toby Balasz said the clearance rate acted as a barometer for how buyers, sellers and investors were feeling about the market. "There has been some pretty troubling data released in terms of the clearance rates," he said. "We want to see them obviously much higher than what they are at the moment and that would suggest that there's probably a lack of confidence in the market." Buyer's advocate Cate Bakos said the clearance rate had been falling in early 2026 because of consecutive interest rate rises and cost of living pressures. "But, we saw a dramatic change after the 12th of May and that was entirely down to the budget announcements," Ms Bakos said. "Investors in established locations are pretty much all but gone." Ms Bakos said the exodus had caused a ripple effect through to owner-occupiers, causing them to hold off from purchasing. "People are fearful," she said. "It's very hard to to feel like you can enact a contrarian kind of response to a shock wave like this because most people will be saying to themselves, 'Is now the best time that I could get in or should I wait a little bit longer and see if prices fall any further?'" Ms Bakos said sellers were nervous about the possibility of a further deterioration in the market. "We've seen a lot of vendors withdrawing their properties from sale, both private sale and auction," she said. She said the same situation was playing out in regional Victoria, but auctions were rarer in that market, and that while other states were also seeing low clearance rates, Melbourne was being hit particularly hard because of the Victorian government's changes to laws requiring reserve prices to be published a week before an auction. Ms Bakos said investors were not only pulling out of purchasing, but were getting appraisals done on their existing properties and engaging agents to sell, which could have impacts for renters. "We're not building enough new property," she said. "Even when those renters are looking at other options, it's going to be smaller-scale dwellings such as apartments in the city-type areas or houses in the fringe areas, and that's not viable for a lot of families," she said. Financial adviser Alex Jamieson said he was already seeing that play out amongst his clients. "The majority of the conversations that we're having with clients at the moment are really around exiting their investment properties," Mr Jamieson said. "Those conversations, to be honest, were already starting to be had before the federal budget. "If anything, the federal budget changes accelerated some of those types of inquiries and conversations." However, he said he was still shocked to see last weekend's auction results. "It always takes your breath away when you see a figure of those types of clearance rates," Mr Jamieson said. He believed investors should not be too hasty about selling up and moving into stocks and trading funds. "The simplicity of the share market does attract people in that there aren't the headaches with being a landlord and all of the things that go with it," he said. "[But] for some people investing in shares, the volatility and the keeping awake at night can really be a concern. "There's not enough housing stock and that still needs to be addressed, so once some of those things normalise our view is let's reassess it in 12 to 18 months time, which coincides quite neatly with the new capital gains tax regime." The federal government said the drop in clearance rates earlier this year showed the changes to negative gearing and capital gains tax were not to blame. "Our reforms are about delivering more affordable options, helping first homebuyers into homes and helping young Australians get ahead," Treasurer Jim Chalmers said. "A range of factors impact house prices and we know that because clearance rates were moderating well before the budget." The REIV's Toby Balasz said it was important to remember that the market always slows down in Melbourne in winter and there was nothing yet to suggest that the wavering confidence would continue into the busier spring selling season. "The fact that there is less properties on the market at this time of year is not abnormal," he said. "We have been asking the government to provide an environment whereby people from both the property investment and owner-occupier point of view are wanting to transact and wanting to make property decisions that encourage activity, as opposed to people not feeling confident to be able to go ahead and make that property purchase." The ABC contacted the Victorian government for comment. Loading... [Image text:] buxton CAYZER