Hi,

Last weekend was a huge auction weekend in Melbourne with 1,634 properties going under the hammer.  A very good test to see how the Melbourne property market is fairing.  At this stage, 1,253 auctions have been reported to Domain.  827 properties sold, 147 were withdrawn and 279 passed in.  The preliminary clearance rate is 66%.  The same weekend last year, the clearance rate was 63% and final clearance rate for last week was 63%.  The Melbourne property market is continuining to be stable after last month’s interest rate rise.

The federal government are considering changes to capital gains tax (CGT) concessions on residential property and negative gearing in the upcoming 2026-2027 budget which will be announced in May.  The model reduces the CGT discount on investment properties from 50% to 33%.  The goal is to raise $5 billion annually.  Changes to negative gearing on property are also on the table.

The proposed changes to capital gains tax (CGT) would likely not apply retrospectively and would apply to housing only.  For example, on a capital gain of $500,000 made on a residential property that had been held for more than 12 months, would result in an extra $33,000 to $40,000 tax payable (depending on your income).

The proposed changes to negative gearing involve limiting negative gearing tax breaks to a maximum of two investment properties per individual.  Less than 10% of property investors have three or more residential properties. The proposal is targeting housing only which means some investors who already have a portfolio of properties, may opt to either buy commercial property rather than residential property, or could look at other ways to buy outside their personal name, whether that be in a company name or self-managed super fund.

These changes are not enough to considerably reduce the amount of residential property investors.  But is simply a cash grabbing exercise from the federal government who are looking to recoup billions of dollars annually from all different areas and in no way will help with the issue of housing affordability or supply.  If anything, it may result in rents increasing which would make it harder for renters (which will affect many first home buyers making it harder to save for their deposit).

Have a great week.

Kim Easterbrook – Managing Director