Andrew Bell Market Update 2026 | Issue 14
Hi. Andrew Bell here with you.
Now, this is the last of fairly sizable newsletters. Sorry they’ve been so big, but there’s been some really big, meaty topics that I wanted to share with you. We’ll then get back into doing much shorter just market updates from there.
Now, I’ve been really surprised by the huge volume of people who’ve been reaching out and wanting more information about what’s likely to happen in the real estate market, the result of the changes to negative gearing and capital gains tax.
Well, there’s more to it than simply that. So I think it’s important to look at this from a contextual point of view.
Real estate markets have always gone in cycles, and those cycles are very much attached to the economic cycle. For the past 50 odd years, the cycle has generally been around seven years, in which there was about a 2 to 3 year period where we saw price growth, followed by about a year to 18 months and sometimes a bit longer, of price correction, followed by a stabilization period where the market neither grew nor fell, and that was generally about another 2 to 3 years. And then you’d start the phase again of price increases.
Now, particularly because of globalization in the last 20 or so years, we see that we’re somewhat much more susceptible to world events. These cycles have been stretching out longer because of that. Sometimes they are now as long as a ten year cycle, with maybe one of those three phases lasting considerably longer than usual.
So that’s the backdrop.
We’ve just experienced an exceptionally long price growth phase, which ran from around the middle of 2020 through until the end of 2025, almost five years. Incredible price growth where virtually all properties, about doubled in value, and some significantly more just in five years. That’s incredible.
That was driven by low interest rates, a lot of government stimulus because of the pandemic and high levels of immigration. And with so much cash splashing through the economy, high levels of consumer confidence resulted. People were out spending and buying at unprecedented levels.
We also saw another effect of the pandemic, and that was the significant shift where people were deciding where they wanted to live. Some wanted to move out of the cities, into country townships. Others wanted to relocate to non-capital but regional cities. For many, it triggered a reassessment of what they wanted their lifestyle to look like moving forward. So markets like the Gold Coast became a mecca for high wealth people relocating for the next phase of their lives.
Now, to me, it’s plainly obvious. Having been through seven cycles, that it was essential for our market to slow in price growth. Just as if you keep blowing up a balloon and you over inflate it, eventually it explodes.
I was concerned about the amount of borrowing people were undertaking to buy real estate, and very much concerned about the pressure on household budgets from debt servicing and the cost of living expenses, which were really starting to expand. We’ve been hearing for months now that everybody’s doing it tough, and what that means really is that expenses are exceeding incomes.
From my perspective, it was well and truly time for the market to take a breather and for things to settle. We’d been lulled into some false sense of security that no matter what we bought in terms of real estate, it would be worth more tomorrow. That’s never been the case in almost any type of market, whether it’s real estate, the stock market or other asset classes as well. How often do we see the stock market crash because prices have become over inflated.
So I do think we’re all seeing a change emerging in the market. For some, they feel it’s because of the recent changes to capital gains tax and negative gearing. Well, that’s part of it. It plays a part, but it’s only part of the bigger picture.
So let me share with you some of my learnings over all of these decades.
The real estate market is fundamentally driven by five key elements.
The first is GDP, which is the health of our economy. When the economy is healthy, it flows through to almost every aspect of society and certainly into the pockets of most Australians. Wage growth, bonuses are paid over time, lots of money swirling around.
The second factor to watch is interest rates. Interest rates are a very crude tool used by the Reserve Bank to manage inflation. Where economies are strong, it’s most common for inflation to begin to rise. When inflation starts to break out, up go interest rates.
You know interest rates are like the accelerator and breaks in a motor vehicle. To stimulate a sluggish economy, the Reserve Bank lowers interest rates, effectively putting a foot on the accelerator. To slow down a reasonably strong economy and snuff out price increases they put the brakes on and that is through higher interest rates.
The problem is that the Reserve Bank, more times than not, generally wait for lots of evidence, and it’s often very slow to act. They either put the brakes on too late and have to put them on hard, or they put the accelerator down too late and they have to really try to force the growth.
The moment I think they put the brakes on a little too late and perhaps a little too strong. As a result, when the signs become plainly obvious, that is where we feel the most pain in interest rates, and they do unnecessary damage to the economic growth.
It goes in a cycle.
Now the third factor that we watch is unemployment. Unemployment is a critical factor because it is often the end result of businesses suffering from a slowing economy and higher interest rates. Before deciding to reduce their workforce businesses have already cut bonuses and over time, that’s happening now. The pain is already being felt by executives employees across Australia.
But as businesses continue to slow, the final straw is the necessity to reduce the workforce. Unfortunately, make people redundant. And that feeds directly back into the economy, because that means there are less consumers because they are unemployed. And that, of course, slows things down overall. It also deeply concerns those who still are in the workforce and are fearful that they may lose their job as well. They stop spending. As a result, they reduce their economic stimulus in the economy. It’s just an overall brake on economic activity.
Now the fourth is population growth. What’s pumped up Australia’s economic growth for decades and included in that is the property market, is stronger demand. And it’s not come through productivity but through increasing population. So much of our economic prosperity has come off the back of this population growth. For a long time annual population growth sat well below 300,000 per annum. In the last couple of years, it’s risen to around 500,000 per annum, and it’s contributed significantly to both economic growth and real estate price growth.
Now, we all know there are arguments for and against immigration. There’s much more to be done to improve the system, perhaps reducing the numbers somewhat while increasing the wealth of those that we invite into our country. That wealth comes in the form of higher skilled levels of the people coming here, and the vital human resources that we need in hospitals, education and so on. But it remains a terribly divisive social issue, doesn’t it?
And the fifth and the final factor that we want to keep watching is consumer confidence. For someone to commit to the purchase of any item, they want to feel confident that then doing so they won’t get into any financial strife, whether they’re using savings or borrowing money. If people believe everything’s rosy and their personal circumstances strong, they are inclined to spend. But when the dark clouds appear on the horizon, spending slows. And that feeds back into the health of the economy. Everything’s this catch 22 situation.
So long before the government’s announcement on negative gearing and capital gains tax, we had already started to see the signs of a slowing economy.
As we moved into 2026, we were caught by surprise that inflation had jumped by quite an amount back in January, and so away we went with interest rate rises. We’ve now had three rises. We’re not sure how many more may come. That will depend heavily on how economic numbers unfold over the next 3 or 4 months.
In unemployment numbers we’ve started to see a jump with the numbers. It’s a bit all over the place at the moment. Often the initial monthly numbers are revised later on, but the volatility that’s in this area suggests to me that unemployment is likely to rise.
In terms of population growth we’re in a real bind. We definitely need particular skill sets. There’s a shortage of skilled tradespeople, doctors, nurses and many others. Slowing population growth too much will simply mean that those shortages remain, maybe get worse. But the government has made it clear that population growth will slow.
And finally, consumer confidence is taking a beating. Whether you’re a homeowner or a tenant, everyone is feeling the affordability pain as the cost of almost everything rises while income growth remains limited. That’s why we constantly hear people saying they’re doing it tough.
With all of that on the horizon, it was always apparent that price growth in the real estate market would be affected. That impact will differ between market segments, different parts of Australia.
We’re already starting to see price falls in many parts of the country. While they aren’t yet obvious on the Gold Coast because migration continues to provide support, it won’t take much for buyers to hear about price falls elsewhere and assume that they’ll occur here as well. That naturally reduces the prices they’re prepared to pay, and certainly the offers that they will make.
Now that the changes of negative gearing and capital gains, of course they’re going to have an immediate effect. The announcement sounded incredibly negative and I must say, incredibly poorly timed by the government. We already had enough on our plates between inflation, rising interest rates, wars in the Middle East, affecting fuel prices and the slowing economy. It won’t be the straw that breaks the camel’s back. But it certainly adds another brick to the saddle bag.
So it’s important that we look at all of this contextually.
For those who own property, your assets have grown enormously over recent years. Congratulations. Enjoy that. Every cycle shows that when a market peaks is often a given that every time there’s a price correction, it’s just natural. You may get back a little of those gains, but unless you only purchase recently, you’re still well in front.
What will support the real estate market this time around is that population growth, here in our market in particular, and it remains reasonably strong at this level.
And banks have now also have a different attitude to mortgage arrears. Unlike a decade ago and beyond that, banks don’t immediately move to sell properties now. It used to be you’re behind in your repayments. We’re selling you up. They’re much more likely now to extend the loan term or provide temporary relief arrangements while people work through their financial difficulties.
That doesn’t mean we won’t see more mortgagee and possession properties, because we probably will. But the response is very different from previous cycles.
A price correction is likely. The question is how significant it becomes. Corrections can last anywhere from 18 months to two years, and much depends on how many sellers decide to sell. If large numbers of properties come to the marketplace, then buyers see that they start to change their attitude. They pay lower prices. That then feeds through to the official records. The next pool of buyers start to see the lower prices. They offer a bit lower. And so it goes on, which is where you see that sort of step down in price over a period of time.
Now banks also adjust their valuations, which affects borrowings. They see what the recent sales are and they’ll change their valuations. A slow down in price growth is healthy for the market. It needed to take a breather and for everyone to reset. There’s absolutely nothing unusual about what’s going on. And importantly it does create opportunities.
So going back into context for a moment, markets around Australia will find differing impacts. Historically, the Gold Coast was one of the hardest hit markets during downturns in the past. But because it’s changed so dramatically, what we’re starting to see now, it’s one of the strongest markets in the country. So this cycle certainly feels different.
A very large portion of buyers over the last five years have been high wealth Australians, many purchase without borrowings, others borrowed conservatively, and a great majority of them were owner occupiers. As a result, we’re unlikely to see a huge pool of forced sellers.
So let’s watch carefully over the months ahead. Watch interest rates because they have a cumulative effect. You might not feel it so much in the first month of increased rates, but over 6 or 12 months it really starts to bite in. Let’s watch the unemployment numbers, because that’s a really critical one to tell us just how much damage is happening in the economy, and also watch that population growth, because while many argue for lower immigration, fewer people here means fewer taxpayers, which means a slower economic cycle.
And watch consumer confidence, because it really is the sum total of all of those factors I’ve talked about. Interestingly consumer confidence recently fell to its lowest record levels since measurements were taken more than 40 years ago. It’s certainly a sign of the time.
In closing, one final thought this is the buying time for buyers. After five years where conditions heavily favored sellers, the market is beginning to rebalance. Buyers have more and more choice and less pressure. So if you’re thinking about upsizing, downsizing, investing or relocating, don’t waste this period. Capitalize on it. Because just as every cycle beforehand has had an upswing and a downswing, she’ll go back up again.
Well, I hope that all makes some sense to you. Keep a close eye on those economic indicators and we’ll monitor as we go forward.
Until next time, thanks for your time. Back to shorter market reports from here.
