A report has warned 124 Melbourne suburbs are in the “danger zone” for any CGT changes that Prime Minister Anthony Albanese’s government adopts. Pictures: Supplied/Martin Ollman.
More than 120 Melbourne suburbs are in the “danger zone” for significant impacts if the Australian government alters the nation’s capital gains tax regime.
A new report has found a host of areas including affordable hot spots Sunbury, Craigieburn, Werribee, Melton and Cranbourne, will face the most dramatic consequences including a “nightmare” for tenants, if next month’s budget contains CGT changes.
In the past week, Prime Minister Anthony Albanese has indicated his government was open to amending tax breaks for property investors, potentially including the CGT discount, as part of a push to address housing affordability in its May 12 budget.
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But the report from research firm and property platform FoundIt suggests CGT changes could see some Melbourne investors hold onto their properties for longer, effectively locking up rental supply and causing rent rises.
This comes on top of the 100-plus rental reforms and a land tax increase that the Victorian government introduced in recent years, causing many investors to sell up.
According to the report, 37 per cent of Melbourne suburbs have rental houses that return yields between 3.5 and 4.5 per cent which puts them in the danger zone for CGT alterations.
In this band, investors generally rely on capital growth, rather than rental returns alone, to make their investment stack up.
Currently, a CGT discount allows investors to reduce their capital gains by 50 per cent on investment properties held for over 12 months – effectively halving the taxable capital gain, which is then added to their taxable income.
The FoundIt report states that 124 Melbourne suburbs are in the “danger zone” for any CGT changes, while Sydney has just nine such suburbs. Picture: Jake Nowakowski.
Found it director of research Kent Lardner said that in suburbs offering 3.5 to 4.5 per cent rental yields, without the capital growth incentives investors would put their money into something else.
“It will be a nightmare for tenants, as the tenant pool grows and the supply of rentals stall, competition will rise. Rents could rise,” Mr Lardner said.
Otherwise, he said, investors could respond to CGT changes by holding their properties for much longer.
“It’s doubtful we will see a sudden increase in investor sales that would rapidly bring down prices,” Mr Lardner added.
A more likely outcome would be a flattening in longer-term home value growth, he noted.
Found it head of research Kent Lardner says removing the discount on capital gains tax charges would be unlikely to push down home prices across the market as a whole.
Ray White Craigieburn’s Trish Orrico said a lot of investors, especially long-term investors, had sold their properties in and around the area during the last 12 months.
Ms Orrico attributed this exodus to the Victorian government’s increased land tax and the cost of updating residences to comply with ongoing rental reforms, which could top tens of thousands of dollars for some landlords.
“They’re just selling up because they’ve had enough and they’ll reinvest that money but sadly they won’t do it in the state of Victoria,” she said.
Ray White Craigieburn’s Trish Orrico says many long-term investors in the suburb have sold up in the past 12 months.
She noted it was important for renters to live in safe and up-to-date homes but that under law, investors could not simply increase rents whenever they wanted to cover home modernisation expenses.
Ms Orrico said that “like night follows day,” CGT changes would likely cause even more investors to sell up.
She’s also worried that despite a recent surge in interstate-based investors buying in Melbourne, many will sell up in a few years once they realise the extent of the state’s taxes and reforms.
According to the report, in Melbourne’s inner suburbs such as Toorak, Camberwell, Brighton, Northcote and Elwood, CGT changes would barely register due to the high amount of owner-occupiers and low investor numbers. Picture: NewsWire/Andrew Henshaw.
A 2025 survey by the Property Investment Professionals of Australia (PIPA) found that about one-third of Aussie investors would stop investing if CGT concessions were reduced.
PIPA chair and Melbourne-based buyers’ advocate Cate Bakos said that a chronic under-supply of housing, construction-sector constraints and decades of insufficient public and social housing investment were the real drivers behind housing affordability challenges.
“Long-term investors are already leaving the market because they no longer feel it’s financially feasible,” she said.
“If that trend accelerates, renters will be the ones who suffer.”
Property Investment Professionals of Australia chair Cate Bakos says any future tax changes should actively support long‑term investment and new housing supply.
Australia’s largest real estate group, Ray White, has highlighted concerns that Treasury’s own modelling indicates that CGT modifications would have a “very small or negligible impact” on overall housing prices and supply, in an statement penned by the company’s managing director Dan White and chief economist Nerida Conisbee.
Mr Albanese recently said the federal government could look to increase funding for state government incentives to achieve the national target of building 1.2 million new homes by July 1, 2029.
Additional reporting by Aidan Devine
Melbourne areas most at risk from CGT changes include Sunbury, Diggers Rest, Craigieburn, Werribee, Hampton Park and Cranbourne.
MELBOURNE: AREAS MOST EXPOSED TO CGT CHANGES ON HOUSES
Suburbs |
Median house price |
No. of buyers who are investors |
Percentage of renter households |
| Sunbury, Diggers Rest | $674,000 | 1 in 5 | 20% |
| Craigieburn, Roxburgh Park | $739,000 | 1 in 5 | 26% |
| Werribee, Point Cook, Hoppers Crossing | $703,000 | 1 in 7 | 31% |
| Hampton Park, Cranbourne | $790,000 | 1 in 7 | 22% |
| Epping, Mernda, Doreen | $791,000 | 1 in 6 | 25% |
| Melton, Kurunjang, Caroline Springs | $672,000 | 1 in 7 | 22% |
| Narre Warren, Berwick | $922,000 | 1 in 10 | 23% |
| Pakenham, Officer | $808,000 | 1 in 11 | 23% |
| St Albans, Deer Park | $800,000 | 1 in 9 | 27% |
| Altona, Williamstown | $1,083,000 | 1 in 10 | 27% |
Source: FoundIt CGT Impact Model, January 2026 data. Areas ranked by composite CGT impact assessment across investor activity, pricing, yields, rental tenure and dwelling composition.
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