Hi,

Domain’s Melbourne auction preliminary clearance rate for last weekend has come in at 56%.  Auction numbers were much smaller this week due to Anzac Day on Saturday.  151 auctions were reported to Domain, 85 properties sold, 22 withdrawn and 44 passed in.  The clearance rate for the same weekend last year was 62%.

May 12th is the date the 2026-2027 Australian Federal Budget will be delivered and there is a possibility of tax reforms which will target investors.  In addition, there be likely more support for first-home buyers and measures to assist increasing housing supply.

Tax items being discussed that are relevant to investors are Capital Gains Tax (CGT) discount changes and negative gearing reforms.

An investor, who has held their property for more than 12 months, is currently able to claim a 50% discount on their capital gains tax.  The word is that the federal government is currently looking to decrease this discount to 33%, or even 25%.  It is believed that this will only apply to residential investment properties and likely to be grandfathered so existing investors are not affected.

There are also rumours about a reform which may limit the amount of properties an investor owns that can be negatively geared.  Also allowing only new builds to be negative geared, capping deductible losses and/or restricting it for higher-income earners are on the discussion table.  Again any changes are believed to be grandfathered so existing investors are not affected.

First home buyers may be included and there is a chance that first home buyers may be able to access super for deposits, larger shared equity schemes and larger deposit guarantees.

Any changes that will negatively affect investors will likely result in lower rental supply and therefore increased rents.  Melbourne’s rental vacancy rate is currently sitting at a very low 1.4% to 1.8%.  The whole purpose of these tax changes is to help increase supply for owner occupiers (and some government revenue raising) and help first buyers enter the market.  However, not all renters have the option of living with mum and/or dad whilst they save for a deposit and rents likely rising, it will take longer for buyers to save for their deposit.

The government should be looking at ways to incentivise investors who provide stability to the rental market rather than the ways to detract them from investing.  It will be interesting to see what eventuates on May 12.

Have a great week.

Kim Easterbrook – Managing Director