In this episode, Damien and Jeremy break down the property-related changes announced in the 2026 Federal Budget, and share their own views on what it means for investors, renters, and first home buyers going forward. This episode covers a live policy debate, and the views expressed throughout are Damien and Jeremy's own stated opinions, not settled fact.
The Negative Gearing Changes
Damien summarises the core change: from 1 July 2027, investors will no longer be able to claim negative gearing to reduce their taxable income on newly acquired established properties. Any investment property held before 7:30pm on 12 May 2026 is grandfathered, meaning existing negative gearing arrangements continue unaffected. For properties purchased after that date (based on contract date), negative gearing can still be claimed up until 1 July 2027, after which any losses are no longer immediately deductible, instead, they're carried forward and quarantined, only usable later to offset either that same property becoming cash flow positive, or a capital gain when it's eventually sold.
Jeremy pushes back on the idea that this is the most significant change, arguing that while it creates a genuine cash flow and serviceability challenge (making it harder for investors to qualify for lending on subsequent purchases), it doesn't represent a permanent loss, since the deferred losses are eventually recovered. Damien counters that the serviceability impact is precisely what makes it a big deal in practice, since it could meaningfully slow new investors' ability to build a portfolio, even though existing portfolios are unaffected.
Capital Gains Tax Changes
Damien outlines the proposed CGT changes: a new 30% minimum tax rate, alongside inflation-based indexation of the cost base from 1 July, requiring a valuation of existing properties at that point. Jeremy notes that in his own modelling, for properties with lower or more moderate capital growth, the new system could actually work out more favourably than the current 50% discount approach, the disadvantage mainly affects properties with growth well ahead of CPI, which he notes is more typical of the investment approach he and Damien favour (buying during a boom, selling as it flattens).
Both raise a specific concern: an investor selling in a low-income year (for example, taking a year off close to retirement) previously benefited from a much lower effective tax rate under the old system; under the proposed 30% minimum, that benefit is significantly reduced regardless of the seller's actual taxable income that year.
New Builds: An Apparent Exemption
Damien notes new-build properties appear to be exempt from these negative gearing changes, remaining eligible under the current rules. Jeremy is critical of this distinction, arguing it doesn't align with the government's own stated goal of easing the strain on existing (established) housing stock, since encouraging more investor demand specifically for new-build product could simply push up prices in exactly the more affordable, first-home-buyer-accessible fringe markets where new stock is typically built, especially given how long it takes developers to meaningfully increase supply in response to increased demand.
Both reiterate a long-standing view from an earlier "Expert Busting" episode (referenced as episode 3, on new versus established property): using a $600,000 example property held for 10 years, an established property was calculated to outperform an equivalent new property by around $170,000, primarily due to land-to-asset ratio, and both maintain this dynamic is unchanged under the new tax rules, the only difference is the relative cash flow advantage new builds offer during the holding period.
Would This Help First Home Buyers?
Damien and Jeremy are both openly sceptical the changes will meaningfully improve affordability for first-home buyers. Jeremy cites the government's own modelling, an estimated 75,000 renters becoming owner-occupiers over the following decade as a result of these changes, and calculates this equates to roughly 0.2% of the more than 3 million rental households nationally, arguing this represents a negligible shift. He also references a separate Treasury estimate that median rent would rise by only around $2 a week as a result of the changes, which he considers implausible given rents grew by roughly $40 over the preceding 12 months alone, well above the general inflation rate.
Why Jeremy Disputes the "Distorted Market" Framing
Referencing comments attributed to Treasurer Jim Chalmers describing existing tax settings as having distorted the housing market, Jeremy pushes back, arguing negative gearing is not a property-specific concession, it's a general principle available to any Australian business or side venture that claims expenses against income, whether that's a small business, a share portfolio, or any other income-producing activity. His view: since equivalent tax treatment applies broadly across the economy, it can't logically be singled out as the specific cause of property price growth, and other tax concessions (such as the 5% deposit scheme or the First Home Owner Grant) have historically favoured owner-occupiers rather than investors.
Who Actually Drives Price Growth?
Jeremy reiterates a recurring theme from earlier episodes: owner-occupiers outnumber investors roughly two to one nationally, and historical data suggests markets with a higher proportion of owner-occupiers tend to show stronger capital growth than markets with a higher proportion of investors, since owner-occupiers are more likely to pay above pure market value and over-capitalise on improvements. On this basis, Jeremy argues investors are not the primary driver of price growth the policy appears to target.
Global Liveability as Context
Jeremy revisits the Global Liveability Index (covered in more depth in Episode 21: The Global Liveability Index 2024), noting Australia was the only country with three cities in the global top 10 in the most recent report he'd reviewed. His broader argument: high property prices in Australia largely reflect genuine, strong liveability rather than a "broken" market requiring correction, drawing a comparison to how a nicer car costs more than a basic one.
Predicted Shifts in Investor Behaviour
Both anticipate several likely shifts if these changes proceed: increased interest in self-managed super funds (since SMSF property investment isn't affected by these personal-name negative gearing changes), a strategy of buying an owner-occupied home before eventually upgrading (leveraging the CGT-free status of a principal residence), continued or increased interest in commercial property (for its typically higher yield), and possibly renewed interest in gearing into shares as an alternative if property becomes less immediately cash-flow-friendly to hold. Jeremy also expects growing interest in granny flats and smaller renovation projects specifically to help offset reduced cash flow.
Market Data at the Time of Recording
Referencing Suburb Data Research Platform's typical value data over the prior 12 months, Jeremy and Damien cite house growth of around 22% in Darwin, 27% in Perth, 19% in Adelaide, 12% in Brisbane, 10% in Sydney, and 7% in Melbourne, alongside unit growth (which they note carries a lower price point and therefore requires less debt, illustrated with a Darwin unit example around $476,000 against a house price closer to $800,000, at a yield around 7.1% for units). Their overall view is that despite the budget changes, genuinely hot markets with demand clearly exceeding supply are unlikely to slow meaningfully, though markets more reliant on yield-focused, less experienced investors could see softer demand.
Does "Blue Chip" or "Investment Grade" Property Exist?
Jeremy reiterates a consistent position from earlier episodes (and the show's Expert Busting series): historical data doesn't support the existence of a genuinely superior "blue chip" or "investment grade" property category, noting that the price gap between the highest- and lowest-priced properties within the same suburb has actually narrowed over time rather than widened, the opposite of what a genuine, durable quality premium would produce.
Impact on Smaller Buyers Agent Firms
Damien predicts smaller buyers agent businesses focused specifically on inexperienced, yield-motivated investor clients may struggle most under the new rules, since that specific client segment is most exposed to reduced serviceability, whereas firms serving experienced investors or owner-occupiers are less likely to be significantly affected.
Should Property Be Taxed Differently to Shares or Businesses?
Asked whether property should be treated differently from shares or general business investment for tax purposes, Jeremy argues property carries meaningfully higher transaction costs (stamp duty, agent commissions) and lower liquidity than shares, a genuine practical difference, while noting nobody raises comparable "distortion" concerns about investors buying shares.
On Intergenerational Wealth and Affordability
Jeremy shares a broader personal view on housing affordability commentary: that models focused purely on current-generation affordability tend to overlook the eventual transfer of wealth as older property-owning generations pass assets on to younger family members, which he believes is arriving later than in the past given longer life expectancy and delayed milestones (marriage, children, home ownership), but will still meaningfully shift generational wealth over time. He argues this dynamic isn't captured in most public affordability commentary.
Closing Advice for Investors
Damien's advice: avoid panic-buying a new property purely to retain negative gearing eligibility, revisit personal strategy and goals first (whether rentvesting, buying an owner-occupied home, or building an investment portfolio), and make deliberate decisions based on individual circumstances rather than reacting to headline changes. Jeremy's own approach: broadly business as usual, with the main practical adjustment being a need for larger cash buffers and tighter cash flow management given reduced serviceability under the new rules. Both acknowledge genuine sympathy for renters and lower-income earners navigating an increasingly difficult affordability environment, while maintaining their view that the specific policy changes discussed are unlikely to meaningfully ease that pressure.