April 2026
Dear Client
Predicted Changes for the 2026/27 Budget
Australia’s housing market is facing its biggest shake-up in decades next month, with changes to generous tax concessions for property investors all but certain to be wound back, sparking fierce debate on whether the move will finally ease affordability — or send rents skyrocketing.
While refusing to be drawn on speculation, Treasurer Jim Chalmers is widely believed to be leaning towards a reduction in the CGT discount — available to investors who hold a property for at least 12 months — from 50
per cent to 33 per cent.
Negative gearing, which allows investors to deduct rental losses against other income, is expected to be limited to two properties.
Industry experts predict the changes will be grandfathered in, meaning those who own property before the likely July 1 cut-off date will still be able to take advantage of the existing tax arrangements until they sell. Mr Kelaher said one obvious effect of grandfathering the changes would be investors simply not selling, reducing the number of homes available to buy.
Rising interest rates have already led to a softening of the residential market, with the preliminary auction clearance rate over the Easter weekend plunging to its lowest level in nearly four years, according to Cotality. REA Group senior economist Anne Flaherty said the changes may drive down house prices in the short term but would see fewer homes built and drive-up rents.
“Reducing the CGT discount would most likely decrease overall investor demand, particularly among those for whom capital gains are the primary motive for investment,” she said.
“This is because investors will need to hold properties for longer to benefit from capital gains. It could also lead investors to hold off selling until after they retire or are in a phase of life where income is lower and their marginal tax rate is lower.”
She added lower investor participation “could also have implications for housing and rental supply over the longer term”.
“Currently, around two in five new homes in Australia are supplied by investors, so reducing investor demand will negatively impact new housing development at a time when we are already seeing a shortfall,” she said.
Falling prices won’t fix housing affordability
Nerida Conisbee, Chief Economist at Ray White, notes that Australia’s housing market is starting to cool. Monthly price growth has slowed, and in some markets, particularly Sydney, prices are now declining as higher interest rates and global uncertainty weigh on sentiment. At face value, this might suggest that affordability pressures are beginning to ease.
However, this is not what the underlying data is showing. The key drivers of housing affordability are moving in the opposite direction and point to conditions becoming more difficult rather than improving.
The core issue remains supply, and more specifically, the rising cost of building new homes. Over recent years, construction costs have been pushed higher by a combination of labour shortages and supply chain disruptions.
Importantly, the drivers of this cost growth are now broadening. Last year’s increases were largely domestic and labour-driven. Now, supply chain pressures are re-emerging. The escalation of conflict in the Middle East is contributing to higher fuel costs and renewed disruption to shipping routes, which will flow through to increased material and construction costs in the months ahead.
(14) Falling prices won’t fix housing affordability | LinkedIn
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