Australia’s residential real estate market is entering a period of adjustment following the Federal Government’s changes to negative gearing and capital gains tax, although history offers some hope for investors and first-home buyers alike, with similar reforms in the 1980s ultimately reversed after rents surged and housing pressures intensified. 

Early market reaction reflects predictable post-Budget uncertainty 

According to the latest data from Raine & Horne, open home attendances on Saturday 17 May 2026 were down 19.8% compared to the same weekend last year. 

This situation has been backed by financial specialist, Our Broker, whose Sydney office reports that new loan enquiries have been sliced in half compared to 12 months ago since the Federal Budget announcements on 12 May. 

Craig Betalli, Senior Broker, Our Broker, “Enquiries are definitely down since the Budget, although the three interest rate hikes this year have also contributed to the slowdown in loan enquiries.” 

He added that around 15% of first-home buyers were previously entering the market as rentvestors, but enquiries from this segment have now “completely dried up”. 

“A change in interest rates impacts borrowing capacity; however, changes to negative gearing make a significantly bigger difference,” Craig Betalli said. 

“While the Budget is supposed to support people entering the property market, it has effectively done the opposite because borrowing capacities have been slashed. Many aspiring rentvestors can no longer borrow enough to purchase their first property through an investment strategy.” 

While the government has retained negative gearing for newly built properties, Angus Raine, Executive Chairman, Raine & Horne, said, “Good luck with this. We already have a shortage of tradies, so who is going to build these new properties for investors? 

“The shortage of skilled labour makes this a flawed policy change. Since COVID, building material costs have also skyrocketed – a predicament only made worse by the latest geopolitical headwinds.” 

History also offers some encouraging lessons, Angus Raine added. “Who says history doesn’t repeat when arguably Labor’s greatest ever Prime Minister, Bob Hawke, and his Treasurer, Paul Keating, scrapped negative gearing in 1985, rents surged in several capital cities, and the policy was reversed within two years. 

“It’s difficult to see why the outcome would be dramatically different to 40 years ago if investment demand falls and rental supply contracts.” 

Angus continued, “Whether it is investors or rentvestors, it simply does not make sense to reduce landlord participation in an already tight rental market where vacancy rates are sitting around 1.1%i. 

“Add annual population growth augmented by more than 300,000 new overseas arrivalsii, and the likely outcome is even greater pressure on rental prices – despite e the Government’s intention to free up more properties for first-home buyers who are currently renting. 

“For aspiring first-home buyers, higher rents will only make it harder to save a deposit and slam the brakes on their dreams of home ownership.” 

The Opposition will fight the changes to negative gearing and capital gains tax “tooth and nail” and has pledged that “if they become law under Labor, a Coalition government will repeal themiii”. 

If you’re considering making a move before winter, contact your local Raine & Horne agent today.