Key takeaways:
Federal Budget uncertainty is impacting investor confidence, but activity remains steady
Low housing supply is intensifying competition, especially under $1 million price points
Borrowing power constraints are reshaping what investors can afford and where they buy
Interest rates can matter more than timing, with long-term strategy often more important than short-term policy changes
Property market decisions are increasingly shaped by finance readiness and flexibility
As the Federal Budget approaches on May 12, uncertainty around potential changes to capital gains tax and negative gearing is weighing on investor sentiment. Investors are particularly focused on media reports suggesting Treasury has been considering potential changes ahead of the budget, including:
Reportedly capping negative gearing deductions to two investment properties per person
Reducing the CGT discount from 50% to 33% for assets held longer than 12 months.
While no measures have been confirmed, for many investors, the uncertainty is less about one specific policy and more about not knowing what could change.
Aussie Belmont broker, Phil Gallagher, said the uncertainty is affecting sentiment.
“People are really unsure about what’s going to happen, both in terms of capital gains tax and negative gearing,” he said. “A lot of people are just sitting back and waiting.”
But while some are taking a wait-and-see approach, activity has not come to a halt. Instead, the current market is being shaped by a more complex mix of factors, including tight housing supply, borrowing constraints and competition from first-home buyers.
“Most of the investors I’m seeing, if they could find the product (properties) to buy, they’d buy,” Gallagher said.
You might also be interested in: How taxes work on rental investment property
Supply shortages complicate the decision to wait
Even for investors holding off on making a move, market conditions are limiting that option.
Housing supply remains tight across many parts of Australia, particularly in the sub-$1 million price range, where investors and first-home buyers are competing for the same properties.
“That combination is making it really hard,” Gallagher said. “There’s really not a lot to look at, and when they do find something, it’s massively competitive.”
That creates a difficult balancing act: buyers waiting for clarity could face even stronger competition if listings remain limited.
Aussie Buyer’s Agent John Statton, said demand continues to absorb available stock, even as sentiment shifts.
“We’re still seeing price increases,” he said. “It hasn’t impacted what the government is hoping to achieve in reducing the cost of housing.”
Policy uncertainty meets inflation and rate pressures
While tax changes are front of mind, broader economic conditions are also shaping investor behaviour.
Independent economist Alan Oster said recent inflation data, driven in part by fuel costs, is unlikely to significantly shift the property market on its own. “It doesn’t really [change the property market],” he said, noting the latest rise was largely due to a spike in petrol prices.
This has contributed to higher living costs, with higher mortgage repayments also forcing many investors to reassess what they can afford, even if they remain committed to buying.
You might also be interested in: Understanding Australia’s housing market: Cost of living by cities
However, Oster cautioned against overreacting to short-term economic signals.
“We haven’t yet seen the impact of the ... rate rises we’ve already had,” he said.
Rates, tax changes and long-term strategy shaping investor decisions
While investors remain focused on possible tax reforms, Oster said they should not outweigh long-term fundamentals, stressing that “rates are more important.”
He pointed to potential changes to negative gearing and capital gains tax as key watchpoints, suggesting there could be limits on the number of properties that can be negatively geared and adding, “perhaps they move away from the 50% discount and replace it with an inflation-adjusted approach.”
You might also be interested in: How brokers can help with rising interest rates.
Despite this, he emphasised that property decisions should be made with a long-term view.
“A property purchase should ideally be a long-term decision,” he said. “Whether you buy this week or next week doesn’t make a big difference over a 10-year period.”
Different markets, different investor strategies
Uncertainty is prompting different responses across the market.
In Western Australia, some investors are selling ahead of potential changes to lock in current tax settings, Statton said.
“There are investors now selling prior to the changes because they’re concerned that their tax implications are going to change,” he said.
You might also be interested in: Should you sell your property or rent it out
Other investors remain active but are just adjusting their strategy, often targeting more affordable property types or expanding their search beyond their local area.
“There will be adjustments made, and what they can afford will need to be realigned with their budgets,” Statton added.
At the same time, eastern states markets, including Sydney and Melbourne continue to face affordability pressures, with investors competing directly against first-home buyers in lower price brackets.
Gallagher said much of that competition is occurring in the sub-$1 million segment, where available stock remains limited.
“In our market, above the $1.5 million to $2 million mark, it’s actually quite slow,” he said. “Investors are generally buying below $1 million [and] that's exactly the space first home buyers are in as well.”
What this means for investors right now
Investors are weighing policy risk against a market that remains highly competitive.
On one hand, potential tax changes are creating hesitation and reducing confidence. On the other, tight stock levels are continuing to support prices in many markets.
For investors, the key is focusing on factors within their control, Statton said.
“Understand what the market is doing in [your] chosen suburb ... The key thing is having finance ready to go and pre-approval in place.
“That gives strength when submitting an offer, as agents have confidence that the buyer can complete the purchase within 14 to 21 days.”
Gallagher said preparation is critical in a competitive market.
“The strongest offer isn’t always the highest offer. It’s the one that can exchange contracts and complete the transaction,” he said.
For buyers unsure about their borrowing power or what steps to take next, speaking with an Aussie Broker can help clarify your options and help put you in a stronger position when it comes time to make an offer.