Another financial year is in the books, and, despite significant headwinds, Australian residential property once again proved why it remains the nation’s favourite asset class. 

Australia’s titanic $12.7 trillion housing marketi delivered annual growth of 7.3% for homeowners and investors, according to property data firm Cotality, while Morningstar data shows the All-Ordinaries Index returned just 2.43% in FY2025-26ii. 

Angus Raine, Executive Chairman, Raine & Horne, said, “Despite the chaos created by the Federal Government’s very ill-conceived changes to negative gearing and capital gains tax, three interest rate rises during the second half of the financial year, ongoing affordability pressures, residential property still comfortably outperformed the local sharemarket over the financial year.” 

Although Sydney and Melbourne experienced stronger years in the past, the nation's other capital cities continued to deliver impressive returns despite showing signs of moderating momentum. Perth led the way with an annual growth of 23.9%, followed by Darwin (19.8%) and Brisbane (17.4%). 

Outside the capital city trends, regional markets continue to outperform. Broadly, the combined regional index was up 0.3% in June, according to Cotality and was 1.1% higher over the quarter. It was up 11.0% over the stretch of the last financial year. 

However, Angus cautioned that while these strong results will be pleasing for some property owners, he warned that the full impact of the Federal Government's property tax changes is only beginning to emerge. 

“I’m not sure the Federal Government has truly factored in the impact its changes to the taxation of investment properties will have on the broader real estate market,” he said. 

“For people who purchased a home in the past three years – and I’m not even talking about investment properties – a change in circumstances, such as a new job, a growing family or financial pressure, could force them to sell the home in a softening market,” Angus said. “Under the Government’s tax changes, many of these homeowners could be left significantly worse off than they expected. 

The property tax changes are also influencing buyer behaviour and leaving some recent buyers worse off. 

Angus said, “Not only am I hearing that residential and commercial property markets across parts of the Sydney Basin have softened, but first home buyers, the very group these changes were designed to help, are also choosing to wait because they believe they'll be buying into a falling market.” 

Angus's concerns about the impact on first-home buyers are shared by Cotality Research Director Tim Lawless. Speaking to The Australian, Tim said it was in “some ways counterintuitive” that the Labor government expanded the 5% deposit scheme to incentivisemore first-time buyers into the market and then, through tax changes, put “some downwards pressure on prices shortly afteriii”. 

“Maybe not that well thought out,” he said. 

The First Home Buyer Guaranteeiv enables first home buyers to buy a property with just 5% of the purchase value as a deposit instead of the usual 20%, with the federal government acting as guarantor, or pay upfront costs such as lenders mortgage insurance that can add thousands of dollars to a mortgage balance. 

That said, Angus Raine predicts that the savvy buyers will still make hay within the chaos. 

"This is the time for the classic counter-cyclical play. This is what the smart money does,” he said. 

"Whether you're a first-home buyer with a healthy deposit or an experienced investor, uncertainty and political chaos often create opportunities for buyers who are prepared to take a long-term view. 

“Australia's housing market is built on powerful long-term fundamentals such as strong population growth and a chronic undersupply of new properties. The most successful property buyers think in decades, not short-term policy changes. 

If you’re considering making a real estate move this winter, contact your local Raine & Horne agent today. And if finance is part of your plans, contact the team at Our Broker on 1800 913 677 to organise your home loan pre-approval.