Sophie Foster
Updated 22 May 2026, 4:25pm
First published 22 May 2026, 1:46pm
Analysts warn sweeping federal tax changes will add to existing RBA pressure, creating what amounts to a six-rate-hike level shock across Australia’s housing market.
This as new modelling by REA Group economists suggests the federal government’s overhaul of capital gains tax and negative gearing will weigh on house prices in a way comparable to recent interest rate rises.
Tresurer Jim Chalmers budget tax changes impacting housing and investors have been modelled with some surprising results.
The reforms - among the most significant changes to housing taxation in decades - take effect from July 2027 and apply to established investment properties, while newly built homes are exempt.
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Prices are expected to fall at worst by 5 per cent longer term than were they would be without tax changes.
But REA Group economist Angus Moore said the impact on home prices was likely to be modest.
“The estimates we have suggest home prices will probably be a little bit lower than they would otherwise be,” he said.
“The effect here is probably not particularly large, and probably not larger than the effect that we’ve seen from interest rates or the three consecutive rate hikes we’ve already seen.”
Mr Moore said modelling pointed to “small, sort of single-digit per cent effects on home prices over the longer run”.
He said the impact would vary across the market though, with stronger effects expected in lower-priced suburbs where investor activity is highest.
“We’d expect to see larger effects in the sort of areas that are more popular with investors currently,” he said.
“That tends to be the more affordable end of the market.”
Median advertised rents on realestate.com.au
That dynamic runs counter to the impact of interest rates, which have been weighing more heavily on higher-priced homes.
“We’ve got rate hikes... putting downward pressure on prices broadly, but probably more pressure on the more expensive properties,” he said.
“And these tax changes... will have aggregate effects, but probably the effects are a bit larger at the more affordable end.”
Mr Moore said there was still uncertainty around investor behaviour once the reforms are legislated.
“It’s a risk, certainly,” he said.
“We don’t have a lot of evidence to go on... we haven’t seen changes to these policies since 1999 for capital gains.”
Expected housing market outcomes short term.
He said rental impacts were expected to be modest overall, but risks remained in already tight conditions.
“The modelling suggests the aggregate effect on rents is pretty modest … but given that the rental market is already very tight … there is a risk that accelerates disproportionately.”
Mr Moore said long-term affordability improvements would ultimately depend on increasing housing supply.
“If we want to improve housing affordability, that really comes back to building more homes,” he said.
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