Blog | The Property Bureau

The Melbourne property market is currently experiencing what many would describe as a “softer” or more subdued phase. Price growth has slowed, buyer confidence has wavered, and in some segments—particularly at the upper end—values have even declined slightly . While this may deter some buyers, history consistently shows that periods like these often present some of the best opportunities for strategic property purchases.

For buyers and investors willing to take a long-term view, a depressed or flat market can offer significant advantages.

1. Less Competition, More Negotiation Power

In a booming market, competition is fierce. Buyers are often forced into emotional decisions, bidding wars, and paying well above reserve. In contrast, Melbourne’s current conditions—characterised by increased listings and slower demand—mean buyers have more leverage.

With housing supply sitting above the five-year average and properties taking longer to sell, vendors are more open to negotiation . This creates opportunities to secure better purchase prices, favourable contract terms, or additional inclusions that simply wouldn’t be possible in a hot market.

Put simply: when urgency disappears, opportunity appears.

2. Improved Affordability and Entry Points

Melbourne has become relatively more affordable compared to other major Australian cities. Its median price growth has lagged behind cities like Brisbane and Perth, shifting its position in the national property hierarchy .

For buyers, this means:

Lower entry prices than recent peaks
Greater choice across different suburbs and property types
The ability to buy in locations that may have previously been out of reach

This is particularly appealing for first-home buyers and investors looking to enter a major capital city market without Sydney-level price pressure.

3. Strong Long-Term Growth Fundamentals

Short-term softness doesn’t change Melbourne’s long-term fundamentals. The city continues to benefit from:

Strong population growth driven by migration
Limited housing supply relative to long-term demand
World-class infrastructure, education, and lifestyle appeal

Even amid current conditions, forecasts suggest Melbourne property prices could grow around 14% over the next two years .

This highlights an important truth: property markets are cyclical. Buying during a lull often positions buyers ahead of the next growth phase.

4. Rising Rental Demand and Improved Yields

One of the most compelling reasons to buy in a softer market is the rental environment.

Melbourne is experiencing tight rental conditions, with vacancy rates falling to around 1.6%—among the lowest in over a decade . At the same time, rents have risen significantly, with increases of up to 22% for units in recent years .

For investors, this translates to:

Stronger rental income
Improved yields compared to previous years
Reduced holding costs relative to income

In many cases, buyers can secure a property at a relatively subdued price while benefiting from historically strong rental returns.

5. A “Two-Speed” Market Creates Hidden Opportunities

Not all parts of Melbourne are performing equally. The current market is often described as “two-speed,” where some segments are flat or declining, while others—particularly well-located, quality homes—continue to grow steadily .

This creates a window for savvy buyers to:

Identify undervalued suburbs or property types
Capitalise on mispriced assets
Buy into areas poised for future gentrification or infrastructure uplift

In other words, the lack of uniform growth actually increases the potential for strategic gains.

6. Reduced Emotional Decision-Making

Fast-moving markets tend to drive emotional decisions—fear of missing out, rushed due diligence, and compromised choices.

A slower market allows buyers to:

Conduct thorough research
Compare multiple properties
Make decisions based on fundamentals rather than pressure

This often results in better asset selection, which is ultimately more important than timing the market perfectly.

7. Timing the Market vs Time in the Market

Trying to “pick the bottom” of the market is notoriously difficult. What matters more is time in the market.

Buying during a softer period means:

You secure an asset before the next upswing
You benefit from compounding growth over time
You avoid chasing rising prices later

Even recent data shows Melbourne has already transitioned from decline to modest growth in some segments, reinforcing how quickly conditions can shift .

Final Thoughts

While headlines often focus on downturns and uncertainty, experienced property buyers understand that these conditions can be advantageous. Melbourne’s current market offers a rare combination of increased supply, improved affordability, and strong long-term fundamentals.

For those willing to act strategically, a softer market isn’t something to fear—it’s something to leverage.

As always, the key lies in buying the right property, in the right location, with a long-term perspective.

To have a no obligation discussion with The Property Bureau about the current market and your property plans, call Alastair on 0450109243 or Kristy on 0408166944.

The Australian Federal Government is once again reviewing the role of key property tax settings, particularly the capital gains tax (CGT) discount and negative gearing. These long-standing concessions are under renewed scrutiny as policymakers weigh up their impact on housing affordability, intergenerational equity, and broader budget sustainability.

While no formal changes have yet been introduced, several reform ideas are actively being debated in Parliament, and Treasury is reportedly modelling a range of scenarios. As with previous reform cycles, the property investment landscape is watching closely.

Current tax settings

At present, Australia’s property tax framework includes two major concessions that are central to most investment strategies:

Capital Gains Tax (CGT) discount:

Individuals and trusts are generally entitled to a 50 per cent discount on capital gains tax when an asset is held for more than 12 months. Companies are not eligible for this discount.

Negative gearing:

Investors can offset net rental losses—where deductible expenses exceed rental income—against other assessable income, such as salary or business earnings.

These two mechanisms have existed in their current form since 1999. In practice, they are often used together as part of a long-term wealth-building strategy, where short-term rental losses are offset by the expectation of capital growth, which is then taxed at a discounted rate.

What changes are being considered?

1. Possible reduction to the CGT discount

A number of proposals have been put forward by policymakers and parliamentary inquiries, including work from independent MP Allegra Spender and findings from a Senate Select Committee reviewing the CGT discount.

The main options being discussed include:

Reducing the CGT discount on investment properties and shares from 50 per cent to 30 per cent for individuals and trusts
Removing the CGT discount entirely for investment properties
Reintroducing indexation of the cost base for inflation, a system used between 1985 and 1999, instead of applying a flat percentage discount

While there is general acceptance that capital gains should not necessarily be taxed in the same way as employment income, there is growing debate about whether the current 50 per cent discount remains appropriate in today’s economic environment.

Some analysts argue that a partial reduction could improve government revenue without significantly discouraging investment activity. Others see it as part of a broader effort to improve long-term fiscal sustainability and fairness in the tax system.

2. Potential reforms to negative gearing

Negative gearing has also returned to the policy spotlight, although governments have historically approached changes in this area with caution due to its political sensitivity and impact on investor behaviour.

Key proposals being discussed include:

Ring-fencing rental losses, meaning losses could only be offset against other investment income rather than wages or salary
Limiting negative gearing to a single investment property per taxpayer
Restricting negative gearing benefits to newly constructed dwellings only, in an effort to stimulate housing supply

These proposals aim to reduce what some policymakers see as distortions in the residential property market, particularly when negative gearing is combined with the CGT discount to amplify tax advantages for investors.

Industry response and economic considerations

The property, development, and construction industries have strongly cautioned against significant changes to these tax settings. Their concern is that reducing or removing the CGT discount and negative gearing could have unintended consequences for housing supply and affordability.

Industry modelling suggests that restricting these concessions may lead to:

Lower levels of property investment
A decline in new housing construction over the medium term
Increased pressure on rental prices, particularly in already tight markets

There are also broader macroeconomic concerns, including potential impacts on employment within the construction sector and a reduction in overall economic activity tied to housing development.

Supporters of the current system argue that investor participation plays a critical role in maintaining housing supply, particularly in high-demand metropolitan areas. Any reduction in incentives, they argue, must be carefully balanced against the need to ensure sufficient private sector investment in new dwellings.

Key implications for property investors and taxpayers

Although no changes have been legislated at this stage, the ongoing debate signals that reform remains a real possibility. Further clarity is expected in upcoming Federal Budget announcements, particularly given the government’s focus on housing affordability and cost-of-living pressures.

In the meantime, property investors and taxpayers may wish to consider the following strategic implications:

Timing of transactions
Future changes may include grandfathering provisions, but this is not guaranteed. Investors considering selling or acquiring assets may need to monitor policy developments closely.
Ownership structures
Different structures—such as individuals, trusts, and companies—are impacted differently by CGT and negative gearing rules. Flexibility in structure may become increasingly important if reforms are introduced.
Investment portfolio strategy
Changes to tax concessions could significantly affect after-tax returns, particularly for highly leveraged or negatively geared investments. Investors should reassess assumptions around yield and capital growth.
Scenario planning
It may be prudent to model alternative scenarios where concessions are reduced or removed. This includes stress-testing cash flow positions and exit strategies under different tax environments.

Looking ahead

The debate over CGT and negative gearing is not new, but it remains one of the most significant policy discussions influencing Australia’s property market. While reform could reshape investment dynamics, it also reflects a broader tension between encouraging private investment and ensuring equitable access to housing.

As discussions continue, investors, homeowners, and industry participants alike will need to stay informed and adaptable. The direction of policy will ultimately depend on how government balances revenue needs, housing supply constraints, and long-term economic considerations.

To discuss your current investment property’s performance and your future property plans, contact The Property Bureau on 0408166944 or 0450109243.

Why Buying in a Softer Melbourne Property Market Could Be a Smart Move