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Brokers have flagged that investor borrowers are already being impacted by the incoming property tax changes handed down in the budget 2026–27.
On Tuesday evening (12 May), federal Treasurer Jim Chalmers handed down his fifth federal budget for the Albanese government, confirming a radical shake-up to negative gearing and capital gains tax (CGT) in a bid to address “intergenerational inequality” and free up housing supply.
According to Treasury, the changes will “give more Australians the opportunity to own their own home by making our tax system fairer” and result in around 75,000 additional owner-occupiers over the next decade.
However, mortgage and finance brokers specialising have warned that the changes will have unintended consequences on borrowers by exacerbating already-tight borrowing capacity for investors while failing to free up housing stock. (Indeed, government modelling suggests that there would be around 35,000 fewer dwellings than if there were no tax policy change – equivalent to around a quarter of a per cent of the current dwelling stock).
A high proportion of broker clients utilise negative gearing. According to broker fintech platform Quickli, around 66 per cent of investment loans were negatively geared in April 2026.
Quickli's head of data, Dr. Amir Shareghi Najar, said that investment loan volumes had grown so sharply that the absolute number of negatively geared loans being written each month is up close to 70 per cent year-on-year.
"The reform isn't landing on a stable cohort. It's landing on one that's two-thirds larger than it was last April," he said.
"Investment lending has surged on our platform. Around 38 per cent of scenarios are now investment properties, up from 34 per cent just 14 months ago. That's a 4 percentage point structural shift driven by investors chasing yield during the rate-cut window," he continued.
"The Budget's negative gearing reforms will reverse that trend, hard. Investors bought properties because the tax benefits made it worthwhile. Remove those benefits, and demand drops. When demand drops, prices fall and lenders tighten borrowing conditions. The policy change doesn't just affect investors—it ripples through the entire market."
Borrower’s capacity shaved by $166k
Speaking to Broker Daily, Sydney-based broker Costa Arvanitopoulos from Finni revealed he had already seen high levels of inquiry from investors seeking to understand their borrowing capacity and financial position, with several “impacted significantly” as a result of the incoming tax changes.
According to the Sydney-based broker, one client’s borrowing capacity reduced by $166,494, while the other dropped by $20,829.
“In one of those situations, the deal didn’t work, so we had to think outside the box and look at alternative ways to structure the loan to help get it across the line, which I believe I’ve managed to do,” he said.
“It’s a reminder that brokers will need to become even more strategic around structuring and servicing.
“When servicing capacity takes a hit, you sometimes need to find other ways to support the client’s objectives and keep the deal moving forward.”
He added that the tax changes would be unlikely to free up stock for first home buyers, as investors would likely pivot to focus on new-build properties to take advantage of negative gearing, thereby pushing up demand for this section of the market.
Arvanitopoulos said: “If incentives are pushed toward new properties – the same places where first home buyers are looking – you’ll likely see more investors move into that same space to take advantage of the tax benefits, which in turn increases competition and pushes prices higher.
“What’s important to understand is that removing negative gearing doesn’t suddenly make detached houses cheaper.”
Other brokers have flagged that banks will likely move to scrap negative gearing altogether for new purchases, regardless of what is being purchased, as a result of the changes, which would add to the challenging lending landscape.
A split market
Queensland-based broker Tommy Anderson from Brokerly said the changes would “split” the market.
“Borrowers relying on negative gearing will see their borrowing capacity drop substantially, whereas those with positively geared assets, the ‘savvy’ investors who focus on cash flow, won’t feel that same squeeze,” Anderson said.
“While positive gearing is the goal for building a large portfolio, the return of indexation effectively slows down net profit growth. This means leveraging strategies won’t be as efficient as they once were, and we’ll see loan terms stretched out for longer as it takes more time to clear debt.”
Anderson agreed that the changes would make it harder for first home buyers to get their foot on the first rung of the property ladder.
“If anything, it makes the climb harder,” he told Broker Daily.
“We’ll likely see rents skyrocket as we can’t build enough to keep up with demand, eating into the very deposits FHBs are trying to save.
“We don’t have a tax problem; we have a supply problem. Without more builders, tradies, and developers to meet demand, these tax changes are just shifting the deck chairs on the Titanic.
“The budget impacts everyone in a negative way, including business owners.”
Regional markets could see prices wiped
Meanwhile, Melbourne-based broker Ben Kingsley, Empower Wealth managing director and chair of the Property Investors Council of Australia (PICA), said the tax reforms were largely brought in to bring in more money to government coffers.
“Disguising these revenue-raising taxes as a housing affordability solution simply doesn’t pass the pub test – particularly when these policies actively discourage investment into broader rental supply,” he said.
Kingsley expressed “serious concerns” about the proposed transition arrangements allowing investors access to the existing 50 per cent CGT discount until July next year, as it could trigger a rush of investors seeking to crystallise recent strong gains before the policy changes take effect.
“There is a genuine risk that many investors decide to cash in their gains at the same time, only to discover that everyone else has had the same idea,” Kingsley said.
“If this occurs against a backdrop of higher inflation, elevated interest rates, a slowing regional economy and weaker investor demand due to the removal of negative gearing benefits, the downside risks become very real.
“There is a material risk of wiping out billions of dollars of value off tens of thousands of home owners and investors properties in these regional markets. That is a significant unintended consequence no government will want to happen on their watch if it materialises.”
He also suggested that the negative gearing policy should have been “left alone”.
“By limiting negative gearing to new builds only, the Government is effectively signalling that future renters should either live in high-density apartments or on the outer fringes of our cities,” he said.
“Middle suburbia risks being hollowed out of rental stock over time, and the limited supply that remains will inevitably attract a rental premium.”
A waiting game
Concerns have been echoed by the mortgage broking associations as to the efficacy of the changes.
The Mortgage & Finance Association of Australia CEO Anja Pannek said “the test for these reforms is whether they improve access to housing in practice without reducing the flow of investment into new supply”.
“Any changes to negative gearing and capital gains tax need to be carefully calibrated to avoid unintended consequences for housing supply, rental availability and investor confidence,” she said.
“The coming days will be important as the detail is tested, understood and explained.
“The priority must be clear, practical information so households, investors and small businesses can understand what these changes mean for their own circumstances.”
Similarly, interim CEO of the Finance Brokers Association of Australia, Peter White AM, said he questioned whether the changes would improve first home buyer take-up.
He said he was unclear how “a reduced supply of rental properties coupled with increasing demand due to factors including population growth can do anything except drive up rental prices for many who are already struggling”.
“At the same time, the government seems to think that if more properties are available for purchase, suddenly more first home buyers can afford them, but this ignores the many other factors that lead to housing affordability,” he said.
“If these changes make lives worse, will the prime minister and treasurer immediately admit they got it wrong, take responsibility and correct it?
“I’d like to see them publicly commit to a course correction if needed, as this will allay the fear many people currently have, and help to rebuild trust that has been lost due to this severe, broken promise.”
What do you think about the housing tax reforms? Let us know in the comments below!
[Related: What’s in the budget 2026–27?]
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