The 2026–27 Federal Budget has placed housing firmly at the centre of national economic policy. For property owners, buyers and investors, the message is clear: the Government wants to shift more support towards home ownership, new housing supply and affordability, while reducing some of the tax advantages historically attached to established investment properties.

The most significant changes relate to negative gearing and capital gains tax. From 1 July 2027, negative gearing will be limited to new builds, with existing arrangements preserved for properties held before Budget night. Investors who purchase established homes after Budget night will still be able to carry forward losses, but those losses will generally only be deductible against residential property income rather than salary or wages. The Government will also replace the 50% capital gains tax discount with an inflation-based discount and introduce a minimum 30% tax on gains from 1 July 2027.

Federal Budget 2026: Major changes are coming for negative gearing and capital gains tax from 1 July 2027

What this means for Investors

For investors, the Budget changes make established properties less attractive from a tax perspective, particularly for highly leveraged buyers relying on annual tax deductions to support cash flow. This does not mean investors will disappear from the market, but it may change where they look.

New builds are likely to become more appealing because negative gearing benefits will remain available for newly constructed properties. Investors may also place greater emphasis on rental yield, depreciation benefits, vacancy risk, body corporate costs and long-term capital growth fundamentals rather than relying heavily on tax concessions.

What this means for Sellers

For sellers of established properties, the impact is likely to vary by property type and location. Investor-heavy segments such as apartments, townhouses and lower-to-mid price established dwellings may experience some moderation in buyer demand. CommBank has estimated that the combined tax changes could leave house prices around 3% lower than they otherwise would have been, with the effect expected to be gradual rather than immediate.

However, quality properties in tightly held locations should remain well supported. Scarcity, lifestyle appeal, owner-occupier demand, school zones, waterfront positioning, proximity to infrastructure and presentation will continue to influence final sale outcomes. In premium markets, the strongest results will still come from strategic pricing, exceptional presentation and targeted marketing to the right buyer pool.

What this means for First-Home Buyers

First-home buyers are intended to be one of the key beneficiaries. By reducing some investor competition for established homes, the Budget may improve access for owner-occupiers trying to enter the market. The Government estimates the tax changes could support an additional 75,000 homeowners over the decade.

That said, affordability will not be solved overnight. Borrowing capacity, interest rates, deposit size, wages growth and local supply constraints will continue to determine what buyers can realistically afford. For serious buyers, the best opportunities may emerge where investor demand softens but owner-occupier fundamentals remain strong.

The Budget aims to improve access for owner-occupiers trying to enter the market for established homes by reducing investor competition

What this means for new housing supply

The Budget also includes a $2 billion Local Infrastructure Fund to help local governments and state utilities deliver essential infrastructure for new housing, including roads, water, power and sewerage. The Government says this funding will support up to 65,000 homes over the decade and lift total investment in housing-enabling infrastructure to $6.3 billion.

This is important because Australia’s housing challenge is fundamentally a supply issue. Tax changes may influence buyer behaviour, but new homes still require land, approvals, infrastructure, labour and feasible construction costs. The success of these measures will depend heavily on how quickly projects can move from policy announcement to actual delivery.

What this means for Renters

For renters, the Budget is unlikely to deliver immediate relief. CommBank expects only a small and gradual impact on rents, while noting Treasury’s estimate that rents could increase by around $2 per week for a household paying the current median rent.

Rental pressure is likely to remain in many undersupplied markets until more dwellings are completed. The Budget also continues Commonwealth Rent Assistance support for more than 1.4 million renters and commits to ongoing work with states and territories on renters’ rights.

Foreign buyer restrictions extended

The Budget also extends the ban on foreign buyers purchasing established homes until mid-2029. This is designed to keep more established housing available for Australian buyers, while still encouraging foreign investment into new supply where it adds to the overall housing stock.

The bottom line

The Federal Budget represents a significant policy shift for the property market, but it is not a simple “prices up” or “prices down” story.

For established property investors, the tax environment is becoming less generous. For first-home buyers, competition may ease in some segments. For developers and investors in new housing, there may be stronger policy support. For renters, meaningful relief will still depend on the delivery of more homes.

For property owners, the key takeaway is this: market conditions are changing, and strategy matters more than ever. Presentation, pricing, timing, buyer targeting and negotiation will play a critical role in achieving a premium result.

In a more selective market, well-positioned properties will continue to attract strong interest but the difference between an average result and an exceptional result will come down to how effectively the property is prepared, marketed and negotiated.

Make your next property decision with confidence. Contact North South Real Estate for expert guidance.

This article is general information only and should not be relied upon as financial or tax advice. Property owners and investors should seek independent advice based on their personal circumstances.

What the Federal Budget 2026 Means for the Property Market