Budget Highlight- How it could impact the property market

While much of the attention has focused on cost-of-living relief, the bigger long-term story could be the proposed changes to negative gearing, capital gains tax (CGT), and the continued push to increase housing supply.

Whether you own property, rent, invest or are trying to buy your first home, the flow-on effects could be significant.

One of the clearest themes in this year’s Budget is encouraging investment into new housing rather than existing homes. Under the proposed reforms from 1 July 2027, negative gearing benefits for residential investment properties would largely be limited to newly built homes. Existing properties purchased after the changes take effect would no longer receive the same treatment, while current owners are expected to be grandfathered under existing rules. That’s a major shift.

For decades, established homes have been popular with investors because of location, land value and immediate rental demand. But these changes are designed to redirect investor activity toward building new housing supply. In simple terms, the Government is trying to encourage investment that adds homes to the market, rather than increasing competition for existing stock.

Negative gearing has been one of the defining features of the Australian property market for decades. This Budget doesn’t remove negative gearing entirely, but it changes who can access it in the future. The likely result is not an overnight market collapse, but a gradual shift in investor behaviour. Some investors may move toward new developments, while others may reconsider how attractive residential property remains compared to other investments. The market could effectively split into two systems: older investments under existing rules, and future purchases under the new framework. That alone could influence supply, pricing and buyer demand for years.

One area receiving less attention is how these changes are affecting lending policy and borrowing capacity. Banks assess investment loans based partly on expected rental income, tax benefits and overall affordability. With investors having reduced access to negative gearing benefits on established properties purchased post budget, servicing capacity has reduced.

In practical terms, some investors may find newly built properties more attractive from a borrowing perspective if the tax settings improve cash flow outcomes. Combined with higher interest rates and stricter serviceability testing, these changes could gradually reshape borrowing behaviour across the market.

Alongside negative gearing reforms, the Budget also proposes replacing the current 50% CGT discount with an indexation model from July 2027. Currently, investors who hold assets for more than 12 months may receive a 50% discount on capital gains tax. Under the proposed model, gains would instead be adjusted for inflation. While the technical details are complex, the broader message is clear: long-term property investment may become less tax-driven than it has been historically. That doesn’t mean investors disappear from the market, but it may change the type of property they buy, the returns they expect, and how long they hold assets.

For regional areas like Port Macquarie, these changes could create both opportunities and challenges. Lifestyle migration, remote work and affordability pressures in major cities continue to support regional demand. If governments continue prioritising new housing development and infrastructure investment, regional centres could attract more construction and population growth over time.

The bigger picture is that Australia’s property market is changing. For years, the formula felt relatively simple: buy property, hold long term, and benefit from rising prices and favourable tax settings. But today’s environment looks different. Higher interest rates, affordability pressures, housing shortages and changing government policy are all reshaping the market. The result may not be a dramatic overnight shift, but rather a slow transformation in how Australians think about property investment altogether. Keep your accountant and broker close to ensure you are getting the right advice and structuring your lending to ensure that it is right for you.