Australia’s property market is entering another period of significant change.
Recent changes announced by the Federal Government to negative gearing and capital gains tax have prompted debate about property prices, investor demand and what could happen to rents.
One of the more attention-grabbing figures came from NAB, with modelling suggesting rents in Sydney and Melbourne could potentially need to rise by 25 to 30 per cent under one scenario as investors adjust to a different after-tax return.
But that figure needs some context.
NAB has not simply predicted that rents across Australia will rise by 30 per cent. Its modelling considers what may need to happen to rental yields if investors are to achieve sufficiently attractive after-tax returns under the new tax settings.
And there is another side to the equation: property prices.
NAB’s assessment is that the market could ultimately adjust through a combination of higher rents and lower dwelling values.
For property investors, prospective buyers and homeowners considering their next move, that makes understanding the changes increasingly important.
What is changing with negative gearing?
From 1 July 2027, negative gearing for residential property will generally be restricted to new builds.
Existing investment properties held before 7:30pm AEST on 12 May 2026 are grandfathered, meaning their existing negative gearing treatment remains.
Investors purchasing an established residential property after that date are treated differently.
Losses from those properties can still be deducted against residential property income and unused losses can be carried forward, but they generally cannot be used to reduce tax on unrelated income such as salary or wages.
The Government’s stated objective is to encourage a greater proportion of investor capital into newly constructed housing and increase housing supply.
Capital gains tax is changing as well
The Federal Budget also changes the way capital gains will be taxed.
From 1 July 2027, the existing 50 per cent CGT discount is due to be replaced by inflation-based indexation, together with a minimum 30 per cent tax rate on capital gains.
There are transitional arrangements and different provisions applying to new residential construction.
Anyone making an investment decision based on the tax consequences should obtain appropriate tax advice about their individual circumstances.
Why is NAB talking about higher rents?
Property investors don’t make decisions based on rent alone.
The purchase price, borrowing costs, rental income, expenses, taxation and potential capital growth all contribute to the overall investment equation.
When one part of that equation changes, investors may reconsider the return they require from the property.
NAB has modelled what could happen if gross rental yields needed to increase by approximately one percentage point to around 4.5 per cent.
Depending on property values and other assumptions, achieving that entirely through rent could require a substantial increase.
But rent isn’t the only variable.
Property prices can adjust. Investors can accept different returns. Interest rates can change. New housing can be built. Some investors may leave the market while others enter it.
Tenants also have a limit to what they can afford to pay.
That is why a 25 to 30 per cent figure should be understood as a scenario rather than an automatic increase that every Australian renter should expect.
Investor borrowing is already changing
Perhaps the more immediate development is what is happening to investor lending.
NAB has reported a sharp reduction in investor borrowing following the Budget, alongside higher interest rates, reduced investor borrowing capacity and softer property prices.
That matters.
If fewer investors compete for established properties, there may be opportunities for some owner-occupiers and first home buyers.
At the same time, if the supply of rental properties tightens while demand remains strong, rental markets could remain under pressure.
There is no single outcome that applies equally to every suburb or every borrower.
Should property investors reconsider their finance?
This is where the conversation becomes much more individual.
An investor who already owns property may have completely different considerations from someone planning to purchase an established investment property now.
A prospective investor considering a new build may face different tax treatment again.
And someone who has held an investment loan for several years may find that the loan itself deserves attention regardless of the tax changes.
Questions worth reviewing can include:
the interest rate and structure of existing investment loans;
interest-only versus principal-and-interest repayments;
available equity;
borrowing capacity under current lender servicing requirements;
whether debt is structured appropriately across multiple properties;
whether refinancing could improve the overall finance position;
how a proposed investment purchase affects future borrowing capacity; and
whether another lender assesses the borrower’s position differently.
The cheapest advertised interest rate isn’t necessarily the only consideration. Loan structure can become particularly important for borrowers building or maintaining a property portfolio.
What about first home buyers?
The changes are intended partly to reduce investor competition for established properties and redirect investment towards new housing.
Whether that translates into materially better buying conditions will depend on location, property type, housing supply, interest rates and buyer demand.
For a first home buyer, falling or slower-growing property prices don’t automatically mean borrowing becomes easy.
Lenders still assess income, expenses, existing debts, deposit, credit history and the ability to service the proposed loan.
This makes borrowing capacity worth establishing before relying on broader predictions about where property prices might go.
Don’t make a property decision from a headline
There are strong opinions on both sides of Australia’s housing debate.
Some investors believe reduced tax concessions will inevitably push rents higher. Others argue rents are ultimately determined by what tenants can afford and by local supply and demand.
Both arguments highlight why individual circumstances matter more than a national headline.
A property in Perth can behave very differently from one in Melbourne. An established apartment can behave differently from a new house-and-land package. A highly geared investor has different considerations from someone with substantial equity.
The finance needs to be assessed in the same way.
Review the numbers before making your next move
If you’re considering buying an investment property, refinancing an existing investment loan, accessing equity or purchasing your first home, it can be useful to establish what your position looks like under today’s lending conditions before making a decision.
Thrive Broking can compare lending options across a broad lender panel, assess borrowing capacity and help structure finance around the proposed purchase or existing property portfolio.
Tax outcomes should be discussed with your accountant or tax adviser, but the lending side can be reviewed now.
Contact Thrive Broking to discuss your property finance options.
One thing I’ve learned over many years in finance is that property markets rarely respond to one change in isolation. Tax settings, interest rates, property values, rental yields and lender servicing requirements all interact.
For investors, the important question isn’t simply whether negative gearing is changing. It’s what the numbers look like for their particular property, debt position and future plans. Two investors with similar properties can have very different borrowing positions depending on their equity, income, existing loans and how those loans are structured.
That’s why I’d be cautious about making a property or finance decision based on predictions about where rents or property prices might go. Review the actual numbers first — particularly if you already have an investment loan that hasn’t been reviewed for some time.
Emma Murphy
Managing Director, Thrive Broking