Federal Budget Housing Measures

The Federal Government has positioned last night’s Budget as a landmark intervention to address housing affordability and intergenerational inequality. However, leading property specialists are questioning whether the measures announced will meaningfully increase housing availability, particularly for first‑home buyers already struggling in a constrained market.  

A detailed review of the Budget’s housing‑related decisions reveals significant gaps between the Government’s stated objectives and the likely real‑world outcomes. 

Concerns Over Negative Gearing Changes

The Government has announced that negative gearing will be scrapped for established dwellings purchased after 7:30pm on 12 May 2026, with deductions to apply only to newly built homes. 

Industry analysis highlights several issues: 

  • Arbitrary timing: The 7:30pm cut‑off raises questions about enforceability and purpose. “If the intention was to prevent a last‑minute investor rush, a simple next‑day commencement would have sufficed,” the analysis notes. 
  • Increased competition for new builds: First‑home buyers already represent 47.6% of new home purchases in Western Australia. Redirecting investors into the same pool risks intensifying competition in a sector already struggling to meet demand. 
  • Unrealistic assumptions about build‑price stability: The Government’s position assumes new‑build prices will not escalate in the same way established homes have. “This ignores the reality that both markets rely on the same input costs: labour, materials, land, and approvals.” 
  • Potential upward pressure on rents: Treasury’s claim that rents will rise by only $2 per week is viewed as implausible. Historical precedent, particularly the Hawke‑Keating removal of negative gearing in the 1980s, saw rents increase by 30% within two years. Reduced investor activity in established suburbs may further tighten rental supply in well‑located areas. 

Capital Gains Tax Discount Removal: Limited Immediate Impact

From 1 July 2027, the existing CGT discount will be replaced with an indexation model. 

Current industry expectations include: 

  • Minimal short‑term market disruption: While some investors may bring forward planned sales, the volume is not expected to be statistically significant. 
  • Longer investor hold periods: Indexation benefits compound over time, likely encouraging investors to retain properties longer. 
  • Possible rental market stabilisation: If investors hold rather than exit, rental stock, depleted post‑COVID, may gradually rebuild, potentially easing pressure over the medium term. 

Uncertain Path to Increased Housing Availability

Despite the Government’s framing, the measures announced do not clearly demonstrate how additional housing supply will be created for first‑home buyers. 

“Both the Government’s assumptions and industry forecasts may ultimately prove incorrect, but at this stage the pathway to improved affordability remains unclear,” Jonathan Marlow, Xceed Real Estate. “More meaningful data will emerge in the coming months.”