Survey flags investor pullback as Australia weighs CGT, negative gearing changes ahead of 2026–27 Budget

Australian property investors are bracing for possible tax changes, with a new survey indicating many could retreat from the market if proposed adjustments to capital gains tax (CGT) discounts and negative gearing proceed. The findings arrive as the government weighs reforms ahead of the 2026–27 federal budget on May 12, with proposed grandfathering intended to apply any changes only to new purchases.

In the.au survey, 39% of investors said they would step back or sell if the current 50% CGT discount on investment property sales were reduced. A further 22% indicated that capping negative gearing concessions to one property would prompt similar action. Combined, 61% signalled they might pull back under the proposed reforms.

Mortgage brokers, the survey suggests, may encounter more cautious investor sentiment, tighter borrowing capacity planning, and questions about whether to refinance, hold, or divest.

Separate economic modelling by Qaive and Tulipwood Economics suggests that restricting negative gearing to one existing rental per investor could significantly dampen new housing supply, potentially cutting dwelling starts by more than 45,000 over five years and leaving rents up to 2.4% higher in real terms by 2029–30.

Industry groups behind the modelling caution that tighter tax rules could make it harder to meet the National Housing Accord goal of 1.2 million new homes over five years, given investors help fund a large share of new construction..au Mortgage Expert Nick Burgess said tax settings cannot be considered in isolation from rental market pressures.

If investors pull back or consider selling, he said, fewer investment properties mean fewer homes available to rent, which can push rents higher. Burgess also noted some investors may respond by lifting rents or delaying sales to protect after-tax returns, and questioned whether any changes would materially improve housing affordability.

For first-home buyers, he added, any easing in competition from investors could be offset by lending serviceability requirements and rising ownership costs. Investor reactions are not uniform across the country, according to the survey. Respondents in South Australia and Queensland showed the highest sensitivity to potential CGT changes, while investors in Western Australia appeared most reactive to caps on negative gearing.

The research suggests some may scale back or shift towards other asset classes, Burgess said, though it remains to be seen how material the impact will be in practice. The government’s deliberations and any final policy design—including possible grandfathering—will determine how investors respond.

For now, the survey and modelling point to a period of caution in the investor market and continued scrutiny of how tax settings intersect with housing supply and affordability.