Housing Tax Reform: What It Really Means for Buyers, Renters & Investors

In This Week’s How’s The Market | Edition 162

• Housing Tax Reform: What It Really Means for Buyers, Renters & Investors

• Will these housing tax changes actually make property more affordable?

• Could these new tax reforms slow house prices… but push rents even higher?

Will limiting negative gearing actually improve affordability?

Or will it simply push the pressure somewhere else?

The Federal Budget has introduced one of the biggest housing tax changes we’ve seen in years.

From 1 July 2027:

• Negative gearing will be limited to new builds
• CGT changes will reduce tax advantages for investors
• Existing investment properties will be grandfathered under current rules

Their plan was simple…
Reduce investor competition for established homes and improve affordability for FHBs.

But the property market is never that simple.

These changes may reduce pressure for some buyers… they could also create new pressure for renters, regional markets, and housing supply overall.

So I wanted to break down what these reforms could actually mean for the market moving forward.

And we have 5 key insights for you today – with the last one being the most important.

Housing Tax Reform: What It Really Means for Buyers, Renters & Investors

    1. The Pressure Doesn’t Disappear…  It Shifts

One of the biggest misconceptions is that reducing investor activity automatically improves affordability.

But housing pressure won’t simply disappear.

If investors stop purchasing established homes and are also incentivised to sell them before next FY:

• Some buyers may face less competition
• But rental supply will also shrink
• Which puts upward pressure on rents

We’ve already seen signs of this in Victoria, where policy changes made investment property less attractive for landlords.

The result?

• Softer house price growth
• But significantly higher rents

Over FY 23/24, there were 20,000 fewer active residential bonds across Victoria.

Over the past five years, Melbourne house prices have remained mostly flat, whilst rents surged by around 35%.

That’s not removing affordability pressure – it’s redistributing it.

Particularly to lower-income households who cannot afford to buy and must rent.

    2. New Supply Isn’t Always Where Renters Need It

Limiting negative gearing to new builds assumes all housing supply works the same way.

But location matters.

Most new developments happen in:

• Outer growth corridors
• Apartment precincts
• Masterplanned communities

While these areas are important for supply, they don’t always replace established rental homes located near:

• Schools
• Hospitals
• Universities
• Transport hubs
• Major employment centres
• Cafe & nightlife

The risk is that rental supply grows in some areas while tightening in others where demand for rentals is actually the highest.

And that makes the market less flexible for renters.

   3. Regional Markets Could Feel the Pressure Hardest

Regional markets may become especially vulnerable under these changes.

Why?

Because many regional areas don’t have large new development pipelines.

Construction costs remain high, labour is limited, and projects are often difficult to make financially viable.

So if investors reduce activity in established regional housing:

• Rental availability may decline
• But replacement supply may not arrive fast enough

And in smaller regional markets, even a small reduction in rental stock can have a major impact on affordability and vacancy rates.

    4. Rentvesting May Become Harder for Younger Buyers

Many younger Australians already struggle to buy close to where they work or want to live.

That’s why rentvesting has become increasingly popular:

• Renting where you want to live
• While buying a more affordable investment property elsewhere

But limiting negative gearing to new builds may weaken that pathway.

Younger buyers could face:

• Fewer investment options
• Higher barriers to entry
• Greater difficulty building long-term equity

At a time when affordability is already stretched, this could further widen generational wealth gaps.

    5. Supply – Not Tax Policy – Is Still the Biggest Issue (Most Important)

This is the key point most people are missing.

Tax changes alone do not guarantee more housing supply.

For new housing to actually increase, projects still need:

• Planning approvals
• Infrastructure
• Labour availability
• Financial viability
• Reasonable construction costs

And right now, many of those challenges still remain.

The government has announced positive supply-side initiatives, including:

• Infrastructure funding to help unlock housing
• Apprenticeship incentives for construction trades
• Faster approvals and skilled labour pathways

These are important steps.

But Australia’s housing issue has never simply been about investor demand.

It’s fundamentally a supply problem.

Because until more homes can be delivered efficiently, in the locations people actually need them…

The pressure in the market doesn’t disappear.

It just moves somewhere else.

What The Agents Are Saying

There is a huge amount of uncertainty right now.

We have heard of 3 deals falling over in the last week from agents due to vendors no longer wanting to sell because of all the changes and the market.

One property which was scheduled for auction this Saturday was withdrawn just days before the auction. The vendors said they wanted to wait for a better market.

One property which we were in the middle of negotiations on was no longer available as the vendor didn’t want to lose the ability to negatively gear so decided to hold on to it.

Some vendors have told real estate agents that they now won’t sell this year as they want to see what happens to the market.

A lot of buyers and vendors alike are like a deer in the headlights of new changes and don’t know what is happening and so are deciding to do nothing until more clarity arises.

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