Higher interest rates and the Albanese government’s clampdown on property tax concessions create a double hit that the Reserve Bank of Australia says could cool the housing market. RBA leadership warns the combination of tighter negative gearing rules and rate rises risks slowing activity, just as affordability is already stretched.
Property analysts say the changes land on a market still digesting previous interest rate increases, so the timing amplifies the impact on confidence.
Under the budget’s changes to negative gearing and the 50% capital gains tax discount, analysts expect buyers and sellers to retreat from the market. SQM Research estimates the number of homes sold could drop by up to 30% as investors step back and existing owners delay sales.
The five largest states together stand to lose about $9.2 billion in stamp duty in 2026-27, equal to roughly 25% of their projected $37.3 billion property transaction take. That shortfall would directly hit state budgets that lean heavily on stamp duty to fund services and infrastructure.
Analysts argue the rules encourage investors to cling to existing properties that keep grandfathered negative gearing benefits instead of selling and triggering capital gains tax. Fewer investors bid at auctions, but many owners also hold tight, which reduces listings and overall turnover across both residential and commercial markets.
The policy shift affects not only private investors but also developers and agents that depend on a steady flow of transactions. Market watchers say the changes could reshape investor behaviour for years, especially for leveraged buyers sensitive to after-tax returns.
RBA commentary places the tax changes alongside interest rate policy as a combined drag that could slow construction and reduce mobility in the housing system. Slower turnover typically means fewer upsizers and downsizers moving through the market, which can lock families into unsuitable housing for longer.
State governments face tough budget choices if stamp duty revenue falls sharply, potentially delaying infrastructure or forcing other tax increases. Housing policy now looks like a balancing act between curbing tax concessions and keeping enough market activity to support both supply and state finances.
