Rate rises have quietly erased the affordability benefit of falling prices — homes are cheaper on paper but harder to actually service. And beneath the “Sydney is falling” headlines, the city has split into two very different markets. Here’s what owners, buyers and investors should be watching this fortnight.
Big Change: SMSF Residential Lending Is Ending
A major shift for investors who borrow inside their super — and a closing window to act before the ban takes effect.
Residential SMSF Borrowing to Be Banned
The federal government, in a deal with the Greens, is abolishing the exemption that lets self-managed super funds borrow to buy residential investment property. The change is set to commence around 10 August 2026 — roughly 45 days after Royal Assent, which was expected in late June. Existing arrangements are grandfathered — keep and refinance; pre-commencement contracts are safe. Business real property borrowing continues under current rules.
What to do now: If you’ve been weighing a residential purchase inside your SMSF, the window to exchange contracts is closing fast. Existing arrangements stay protected, but any new residential LRBA needs to be in train before commencement.
Commercial SMSF Lending Set to Surge
With residential borrowing inside super closing, expect investors to pivot to commercial property — which remains fully available.
Commercial Becomes the New Frontier for SMSF Investors
As the door closes on residential SMSF borrowing, commercial property is set to take its place. Commercial SMSF lending stays fully available — retail, industrial, warehouses, offices, childcare and more — and we expect demand to surge as investors redirect their super strategies into income-producing commercial assets. Rates sit in the mid-7% range (higher than residential, reflecting commercial risk), fees for valuation, legal and application work exceed residential lending, and servicing draws on employer and voluntary super contributions plus the property’s rental yield.
Lower Prices, But No Easier to Buy
Rate hikes have made mortgages harder to service everywhere — wiping out the affordability benefit of the recent price falls.
Falling Prices, Rising Servicing Costs
Sydney and Melbourne values have slipped, but higher interest rates mean the income required to service a mortgage has gone up, not down. The result: housing is cheaper to buy on paper, yet harder to actually afford. Since the start of the year, the household income needed to service a median-priced house has climbed across the country.
Melbourne’s affordability edge is now enormous — a median Sydney house demands around $70,000 more in household income than its Melbourne equivalent. For buyers priced out of Sydney, Melbourne increasingly looks like the value play among the major capitals. With servicing costs — not sticker prices — now the binding constraint, getting your borrowing structure right matters more than ever.
Spotlight of the Week: Sydney’s Split Market
Sydney isn’t crashing — it’s separating into two completely different property markets. Based on Cotality (CoreLogic) LGA-level data, mid-2026.
Expensive Sydney Is Falling. Affordable Sydney Is Still Rising.
“Sydney prices are falling” is true — and deeply misleading. There are hundreds of individual markets moving in different directions.
Expensive areas such as Ryde, North Sydney, Randwick, Strathfield, Hornsby and Mona Vale have mostly declined over the past year. Some middle-ring suburbs — Castle Hill, Bankstown, Hurstville — have now started turning negative too.
More affordable pockets — Blacktown, Penrith, St Clair, Merrylands, Liverpool, Bankstown, Oran Park, Camden and Ingleburn — have kept rising. The further west you move beyond Penrith, Liverpool and Camden, the stronger the affordable segment has generally held.
🏠 The Rental Market Tells the Same Story
Almost every Sydney LGA recorded rental growth over the past 12 months, with only two isolated areas declining. As fewer investors buy established properties after the recent tax changes, rental supply is likely to tighten further — with rents across Western, South-West and North-West Sydney potentially rising more than 5%, and in some areas more than 10%, annually.
Property markets move in cycles. From 2006–2011 the suburbs closer to the CBD led; from 2011–2016 the outer affordable suburbs dramatically outperformed; from 2016–2021 the inner-city regained leadership. Right now we appear to be entering another cycle where affordable suburbs take the lead — higher rates and cost-of-living pressure are pushing buyers further from the CBD. That doesn’t mean every outer suburb will boom, but affordability has become one of the single biggest drivers of performance. The lesson: national headlines don’t help investors — data does. The opportunities haven’t disappeared. They’ve simply shifted to different parts of the market.
Market Insights
Key news and developments for Australian property owners and investors this fortnight.
Perth +25.8% vs Melbourne +0.5% — a 25-Point Gap
The idea of a single “national market” barely holds anymore. Over the past year Perth surged 25.8% while Melbourne managed just 0.5% — a 25-point spread between the strongest and weakest capitals. Sydney values dipped 0.9% in May and sit 2.1% below their November 2025 peak, while Melbourne fell 0.8% and is now 3.2% below its March 2022 high. Where you buy matters more than ever.
Stock Edges Up, Buyers Regain Leverage
New listings hit 33,914 in the four weeks to 14 June — still 4.9% below the five-year average — while total stock on market reached 129,010, up 1.7% on a year ago but 6.5% under the five-year norm. Supply remains tight by historical standards, but it’s loosening just enough to shift negotiating power. Median vendor discounting across the capitals has crept up to 3.3%, giving well-prepared buyers more room to move.
Demand Shifts to Units — Brisbane Now the Priciest Entry Point
As affordability bites, buyer demand is rotating from houses toward apartments. That shift has all but closed the long-standing price gap between Brisbane and Sydney units — and pushed Brisbane’s entry-level apartments to the most expensive in the country. For first-home buyers and investors chasing yield, the unit market is increasingly where the action is moving.
This article was originally sent to Assembly Finance clients as an email market update and is republished here for reference. Rates, figures and policy settings were current at the date of publication and may have changed. General information only — not financial advice. Assembly Finance is a Credit Representative of Finsure Finance & Insurance Pty Ltd (Australian Credit Licence 384704).
