What Proposed Tax Changes Could Mean for Property Investors

Key Insights for Perth Property Investors

As we approach the Federal Budget, discussions around Capital Gains Tax (CGT) and negative gearing are once again gaining momentum. These potential changes are creating uncertainty for Perth property investors, particularly in a market where rental demand remains strong and supply is still constrained.

At D Residential Group, a leading property management Perth agency, we believe it is important to look beyond the headlines and understand what these proposed changes could realistically mean for investors, tenants, and overall housing supply.

Understanding the Proposed Changes

Current discussions suggest the Federal Government may reduce the CGT discount and introduce restrictions around negative gearing, particularly for investors with multiple properties.

These types of policy changes are often positioned as a way to improve housing affordability. However, insights shared by industry bodies, including Real Estate Institute of Western Australia, suggest the outcomes may not be as straightforward.

Will Housing Become More Affordable?

At face value, reducing investor incentives may appear to support first home buyers. However, modelling referenced across industry commentary indicates the impact on property prices is expected to be minimal.

In some scenarios, price reductions may be marginal, which is unlikely to significantly improve accessibility for buyers.

In Perth, where demand continues to outpace supply, any short-term increase in listings would likely be absorbed quickly, limiting any lasting effect on affordability.

The Impact on Rental Supply

One of the most important considerations is how these changes may influence rental supply.

If investing in property becomes less attractive, it is likely that some investors will exit the market or hold back from purchasing additional properties. Over time, this can lead to fewer rental properties being available.

A reduction in supply, combined with ongoing demand, typically results in increased rental prices and greater competition for tenants.

For renters, this could mean higher costs, fewer options, and more pressure in an already tight market.

Changes to Negative Gearing

Another proposal being discussed is limiting negative gearing to investors who own fewer properties.

While this may sound like a targeted measure, available data suggests only a small proportion of investors would be directly impacted.

In response, investors may choose to restructure their portfolios, sell selected properties, or adjust rental pricing to offset reduced tax benefits.

There is also the possibility that investors shift their focus to more affordable suburbs, which are often the same areas first home buyers are targeting. This could increase competition in those segments rather than reduce it.

Broader Economic Considerations

Beyond the immediate property market, there are wider implications to consider.

Industry modelling referenced by organisations such as Real Estate Institute of Australia and the Housing Industry Association indicates that changes to investor taxation settings may lead to a reduction in new housing construction.

This includes fewer dwelling starts, reduced construction activity, and a potential decline in employment across the building sector.

At a time when increasing housing supply is a national priority, any policy that discourages development could have long-term consequences for affordability and availability.

Who Is Likely to Benefit?

While these proposed changes are often introduced with the intention of improving affordability, the overall outcome is less clear.

Buyers may see limited price relief, investors may reduce activity, and tenants may face rising rental costs.

This highlights the importance of carefully balancing policy decisions to ensure they support both housing accessibility and long-term supply.

Our Perspective at D Residential Group

From what we are currently seeing across the Perth market, demand for rental properties remains strong, vacancy rates are tight, and well-presented homes continue to attract high levels of interest.

In our view, the key to improving housing affordability lies in increasing supply, rather than discouraging investment.

A well-balanced market requires both investors and owner occupiers, supported by policies that encourage sustainable growth.

Final Thoughts

For Perth property investors, changes to taxation policy can create uncertainty, but they also present an opportunity to review your strategy and ensure your portfolio remains well positioned.

Working with an experienced property management Perth team can help you navigate these changes with confidence, protect your investment, and maximise long-term returns.

If you would like tailored advice or support with your investment property, contact D Residential Group to discover the difference.