Australia’s largest home lender is working on the assumption that the federal government will use the May budget to trim the 50% capital gains tax discount for property investors down to 25%, and that this shift will be “grandfathered” so existing holdings keep their current tax treatment while new purchases face tougher rules. This thinking sits on top of a housing market that has already been running hot, supported by years of low interest rates, strong migration and a tight supply of new dwellings, and it comes as policy agencies continue to model a wide range of possible tweaks to both capital gains tax and negative gearing.
In fresh modelling, the bank suggests that cutting the discount in half would see national dwelling prices settle at roughly 4% below where they otherwise would have been, with the hit spread over several years rather than landing in a single sharp correction. The forecast has price growth slowing notably from an expected 8.7% in 2025 to about 5% in 2026, with the drag explained by a mix of higher interest rates, the smaller capital gains concession and softer population growth. Policy agencies are also looking at more radical options such as replacing the discount with a flat tax plus indexation or reworking negative gearing, but the bank leaves those scenarios out of its current quantitative work because they are less defined.
Stepping back, this all looks like the start of a new phase in the housing cycle rather than a sudden crash, with the bank’s estimates implying that without the policy and macro changes now in play, dwelling prices might have risen closer to 7% in both 2026 and 2027 instead of the downgraded 5% and 3% now on the table. Rents are expected to edge only slightly higher, around 0.2% above the baseline over time, as investors try to recover some of the extra tax paid but the bigger shift may be in strategy, with advisers already pointing investors toward reviewing ownership structures and weighing alternatives like share portfolios or “rentvesting” where people buy an investment property first and rent where they actually want to live. Property industry groups warn that changing capital gains settings in isolation could discourage new investment and worsen an already tight supply situation, so the eventual impact on affordability, construction and long term rental availability still seems to depend heavily on how broad and coordinated the final tax package turns out to be.
