Property giant says home prices must fall 27pc to offset new tax rules

Home prices may need to fall as much as 27 per cent even if rents surge another 20 per cent for some investments to become self-funding under the new negative gearing rules. And if property prices hold steady, tenants could be the ones to feel the pain, with rents across the capital cities needing to jump about 30 per cent from current levels to make investing attractive again. New Ray White analysis attempts to calculate how far property prices and rents may need to move to entice investors back into the market following the federal budget decision to remove negative gearing for established properties. Ray White research reveals home prices may need to fall 27 per cent for investors to get back into the market. Investor activity fell sharply following the May 12 Budget, with the number of new investor loan commitments dropping 8.6 per cent in the June quarter and the value of lending falling 10.2 per cent. The analysis comes as data shows the gross rental yield across the combined capital cities was 3.95 per cent in July. It estimates yields would need to rise to about 5.15 per cent to compensate an investor on the top marginal tax rate for the loss of negative gearing, based on a...