Before changes to negative gearing were announced, industry spokespeople warned that it would cause a rise in rents as landlords try to mitigate losses. The Treasury was aware of this as well and forecast a $2-a-week rise. New data has suggested Australia is blowing well past that.
PropTrack data has recorded national rents surging by 3.1% over the past three months, an average of $21 per week increase in typical asking rent. However, Cotality head of research, Gerard Burg, says that it’s too early to attribute this rise to the budget.
As yet, there’s no direct cost impact as changes to negative gearing and Capital Gains Tax take formal effect on 1 July 2027 and existing holdings are grandfathered. Current landlords have no new cost to pass on. Any effect the budget is having is sentiment and anticipation.
Consider as well that rents have grown 40.6% nationally over the past five years, or $204. In comparison, rents rose by 12.2% (or $55) between 2016 and 2021. This is primarily due to constrained supply and has been a persistent trend before any negative gearing changes were announced.
Renters are Struggling with Stagnant Wages and Limited Supply
Nearly half (47%) of renters said they struggled to pay rent in June, according to Finder’s Consumer Sentiment Tracker. Only 38% of homeowners said they struggled with their mortgage repayments in the same month.
Wages have not kept up with either house prices or inflation. Households now spend 33% of their income on rent nationally, up from 27% in 2021. The national dwelling vacancy rate over the June quarter was 1.6%, lower than the five-year average of 1.8%.
Put these together and you can see that this trend was already in progress before the budget announcement and subsequent legislation.
The Budget’s Impact
Rental dwelling yields are trending higher as house prices start to dip, rising to 3.7% in June from 3.5% at the end of 2025. Despite that, yields are still well below the cost of capital, so landlords are still far from being able to positively gear or even neutrally gear their properties.
Supply will continue to be an issue as well. PIPA’s 2025 survey, taken before the budget, found more than half of investors said they would stop investing if negative gearing rules changed.
Fewer landlords would suggest fewer rentals and higher costs for tenants.
The impact on construction is ‘ambiguous’, according to CBA. While retaining negative gearing on new dwellings is likely to point some investors in that direction as well as supply-side measures in the budget to enable new housing, CGT changes might reduce investor appetite for housing.
However, CBA expect the incentives, exemptions, and supply measures in the budget will be ‘strong enough to offset the broader reduction in investor demand for housing,’ but there is still ‘some uncertainty around this.’
What This Means for You
If you are renting, the pressure you are feeling is real, but it did not start with the budget. Tight supply, low vacancy rates and wages that have not kept pace have been building for years. If you are an investor, the changes reward one thing above all: getting the structure right. Negative gearing remains available for new builds, existing holdings are grandfathered, and the difference between the two can now run to six figures over the life of an investment.
Whether you are weighing up your next investment, reviewing an existing loan, or saving for a first home in a rising rental market, our team can help you understand what the new rules mean for your situation. No pressure, no jargon, just simple guidance.
This article is intended as general information only and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute financial, credit, tax or legal advice. Before acting on any information in this article, you should consider its appropriateness to your circumstances and seek advice from a qualified professional. Figures are drawn from third-party sources current at the time of writing and are subject to change. Lending criteria, terms, conditions, fees and charges apply.