Budget reforms aimed at giving first homebuyers a better chance to compete in the market could be having the opposite effect. But Angus Raine, Executive Chairman of the Raine and Horne Group, says one initiative ticks plenty of boxes. 

The latest Federal Budget has proposed ending negative gearing and the 50% capital gains tax (CGT) discount on established rental properties purchased after 1 July 2027. 

Only newly built dwellings can continue to be negatively geared from mid-2027, and gains on sale may be taxed at either the 50% discount rate or using indexation plus a minimum 30% tax rate – whichever the investor prefers. 

The idea behind these proposed reforms is to increase the supply of housing stock, and make it easier for first homebuyers to get a toehold in the market by reducing competition from investors. 

However, this is a clear example of good intentions failing to deliver good policy. 

Investors enter into first homebuyer territory – in droves 

A recent report by The Australian found landlords are “muscling into” newly built housing estates – the one market where first homebuyers have typically had the upper hand. 

According to the report, first homebuyers make up almost 41% of purchasers in the new-build market, while investors, who have historically gravitated to established homes, account for fewer than one in five new-build buyers. 

But this is changing, 

Drawn by the appeal of high depreciation claims and the chance to claim negative gearing tax savings, growing numbers of investors are turning their attention to new housing. 

Is it the outcome the Albanese government anticipated? Unlikely.  

However, the policy change reflects a broader misunderstanding of how the property market works in Australia. 

Angus Raine explains, “Federal Treasurer Jim Chalmers and Anthony Albanese often spoke about how investors could turn up at auctions and outbid first homebuyers because of negative gearing.  

“But in reality this just doesn't happen.  

“Owner-occupiers will almost always outbid investors because investors aren't making an emotional bid. They are making decisions based on the numbers. 

“The argument from the Labor government was that negative gearing somehow gave investors an uplift or advantage at auction. There's no uplift. It's simply not true.” 

Smart policy in South Australia ends stamp duty for downsizers 

In a move that Angus Raine (and many others) applaud, South Australia has introduced stamp duty relief for downsizers. 

Eligible South Australians aged 60 years and over who are downsizing to a newly built home valued up to $2 million no longer have to pay stamp dutyi. 

It’s estimated this will save eligible downsizers up to $103,830. 

Angus Raine says, “I have been advocating for this type of reform nationally for some time, which also shows how good government policy can make a difference. 

“By removing stamp duty for downsizers who move into a newly built home, it’s possible to kick multiple goals, including: 

• Increased housing supply 

• Freeing up larger homes for young families, and  

• Helping seniors into homes that better suit their lifestyle. 

“Hats off to South Australia for introducing a commonsense policy reform.  

“If a similar initiative was introduced Australia-wide, we would be more likely to see greater movement across all segments of the market, and this would be more likely to benefit first homebuyers that simply penalising investors for supporting the rental housing market.” 

Speak to your local Raine & Horne agent for properties that suit your buying goals.