Property industry warns CGT, negative gearing cuts will hurt home building, rental market

Australia’s property industry warns any cuts to the capital gains tax discount or negative gearing concessions will hurt home building, as the Prime Minister claims social cohesion is at stake without change. 

The federal government looks increasingly likely to slash the CGT discount at next month's budget, with negative gearing benefits also potentially on the chopping block.

Prime Minister Anthony Albanese said on Tuesday that many young people felt like they hadn’t had a “fair crack” compared to older generations, and that this year’s budget would try to address the issue of intergenerational equity.  

But Australia’s biggest industry groups are warning any changes will lead to less home building at a time when the country is already failing to construct enough new homes to meet its own targets.  

Any changes to these property investor concessions may end up shrinking the supply of rental homes nationwide and inadvertently push rents higher, they caution.  

Recent Qaive and Tulipwood Economics modelling commissioned by the Real Estate Institute of Australia, Property Council, HIA and Master Builders showed new home building would slow, and rents would rise under a range of scenarios. 

Australia's property industry is warning changes to the CGT discount on housing and negative gearing concessions will hurt home building. Picture: Getty

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If negative gearing concessions were removed for all new and current rental properties except for one current property per investor, the modelling shows it would slash home building starts by 45,500 over the five-year period 2025-26 to 2029-30. 

It would drive up rents above that in the business-as-usual (BAU) scenario by more than 2% per year in real terms by 2029-30.  

Under a different scenario, there would be almost 46,000 fewer new home starts over the period if the CGT discount was halved to 25% and negative gearing was restricted to a single existing property. 

How CGT and negative gearing changes could impact home building - Qaive and Tulipwood Economics modelling

Real Estate Institute of Australia president Jacob Caine told realestate.com.au that the government should focus on housing delivery first.  

“Modelling undertaken by every think tank, every economist, and the government shows that adjusting downwards or removing the current CGT settings hurts housing delivery,” he said.  

“Australia is in a structural housing deficit and cannot afford to make policy decisions that mean fewer homes get built for Australians.  

Modelling shows CGT discount and negative gearing will likely drive up rents. Picture: Liam Kidston

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“The government needs to first address the regulatory barriers to delivering housing at the scale we need, before contemplating changes to tax settings that ultimately harm the very people they're trying to support – first-home buyers and renters.”  

He said the government should focus on housing delivery by resolving planning constraints, high infrastructure charges, low construction productivity, regulatory duplication, and workforce challenges. 

Australia is already behind on the National Housing Accord target of building 1.2 million new homes over the five years to mid-2029.  

Real Estate Institute of Australia president Jacob Caine says the government should focus on housing delivery first. Picture: Supplied

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There are fears that changes to property investor concessions will make conditions even harder for home builders, which are facing rising building costs because of the fuel crisis and the near certainty of higher interest rates. 

HIA managing director Jocelyn Martin said property investors built two out of five new homes in Australia.  

“We can ill afford to see those investors leave the market for more attractive options,” Ms Martin said.

“If we do not build enough homes, rent prices will continue to increase.”  

The median weekly rent for homes across Australia’s capital cities climbed to $680 during the March 2026 quarter, up 4.6% compared to the same time last year, according to PropTrack. 

Across regional areas, it jumped 9.1% to $600 during the same time.  

Rising rents and tight vacancy rates have hit rental affordability, which remains at its lowest level since at least 2008, when records began, according to the latest realestate.com.au Rental Affordability Index.  

Prime Minister Anthony Albanese is weighing up cuts to the CGT discount on housing and negative gearing concessions in the lead up to the May 12 budget. Picture: Hilary Wardhaugh/Getty

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Despite these warnings, the federal government appears to be laying the groundwork for cuts to the CGT discount and negative gearing concessions in its May 12 budget.  

When asked on Tuesday about potential changes to negative gearing and the CGT discount, the PM said the issue of intergenerational equity was important. 

“In Australian society, what we know is that for many young people, they feel like they haven't got a fair crack compared with my generation and the generations beforehand,” he said.  

He said the theme of this year’s budget was resilience, citing a range of issues including domestic manufacturing, cyberattacks, global shocks and the wider economy.  

“But also resilience is about social cohesion and giving people that sense of ownership over the economy, making sure that the economy works for them, not people working for an economy, and that’s why equity is very important," he said.