Australia's property market is showing signs of a sharper-than-expected slowdown following the Labor government's May budget, which curtailed negative gearing — a popular tax arrangement allowing landlords to offset rental losses against their income — for properties purchased after 12 May. Auction clearance rates in Sydney and Melbourne have fallen below 50%, levels not seen since the early pandemic, while AMP chief economist Shane Oliver forecasts a 5% price drop over the next 12 months. Despite the near-term cooling, most economists caution that Australia's chronic shortage of housing stock is likely to place a floor under prices once interest rates ease and investors adjust to the new tax landscape.