Last updated: 12 May 2026
2026-27 Budget · Market impact
What the 2026-27 Budget does to house prices
Treasury's headline modelling of the 2026-27 Budget's property tax reforms is unusually specific: house price growth is expected to run around 2% lower over a couple of years compared to no policy change. At the current national median, that's a saving of around $19,000 for a buyer in the window. It's slower growth, not a fall – and the supply-side measures should push the same direction over a longer horizon.
The Treasury numbers
~2%
Slower house price growth
Over a couple of years vs no policy change
$19,000
Buyer saving at national median
Central Treasury estimate
75,000
Additional owner-occupiers
Over the next decade
+1pp
Home ownership share
Lift in medium term
Why prices slow rather than crash
Three reasons embedded in the design:
- 1.Grandfathering. Properties held at 7:30pm AEST 12 May 2026 keep their existing tax treatment. There is no forced-sale dynamic.
- 2.New-build carve-out. Negative gearing and (optionally) the 50% CGT discount remain available for new builds. Investor demand redirects rather than evaporates.
- 3.Prospective changes. CGT changes only apply to gains accruing after 1 July 2027. Existing capital appreciation is locked in under the old discount.
Which markets are most exposed
Treasury's Statement 4 analysis tells us where the current tax settings have been doing the most work:
- Investor lending has run at 80-90% to existing dwellings since 2019, concentrated in capital cities. These are the markets where investor demand falls fastest under the new rules.
- Capital-city detached housing has been over-compensated by the flat 50% CGT discount for two decades. Indexation produces a less generous result for these assets.
- Capital-city units and regional units have been under-compensated by the flat discount – they get a better deal under indexation.
- Shares historically have been roughly neutral on average, with significant variation by holding period.
Supply: what gets built
Treasury candidly notes that lower price growth produces fewer new dwellings – around 35,000 fewer over the decade. That impact is more than offset by the new $2 billion Local Infrastructure Fund (up to 65,000 homes) and the build-to-rent industry estimate of 80,000 new rental homes. The net supply story over a decade is positive.
Rents
The modelled rent impact is less than $2 per week for a household paying the median rent – well below the recent increases to Commonwealth Rent Assistance. Combined with the new BTR supply and the Local Infrastructure Fund, the Government argues the medium-term direction for rents is down.
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Related reading
- Negative gearing limited to new builds
- CGT discount replaced with indexation and a 30% minimum tax
- $2 billion Local Infrastructure Fund for housing supply
Frequently asked questions
Will house prices fall after the 2026-27 Budget?
No – Treasury models slower growth, not a fall. House price growth is expected to be around 2% lower over a couple of years compared to no policy change. For comparison, average annual growth since 2000 has been 6%.
How much will I save buying a home after 1 July 2027?
Treasury's central estimate is around $19,000 at the current national median price. The actual saving depends on the local market – higher-priced markets where investor demand is most concentrated may see the largest effect.
Will Sydney and Melbourne be hit harder than regional markets?
Likely yes, on Treasury's logic – the negative gearing and CGT reforms target investor demand, and investor share of lending is highest in capital cities. The 50% CGT discount also disproportionately benefits capital-city detached houses on Treasury's inflation analysis. Regional units have historically been under-compensated.
What about new builds?
New builds are exempt from the negative gearing changes and investors can still choose between the 50% CGT discount and the new system at sale. Expect investor demand to shift toward new builds, particularly higher-density product.
How does the Local Infrastructure Fund affect prices?
The $2 billion Local Infrastructure Fund supports up to 65,000 new homes by funding water, power, sewerage and road connections. More supply puts downward pressure on prices over the medium term, especially in growth corridors.
Source: Budget Paper No. 1, Statement 4 (Box 4.4 and Table 4.1), Australian Treasury, 12 May 2026.
Disclaimer: This information is general in nature and does not constitute financial, legal, or tax advice. Calculations are estimates only and may not reflect your exact circumstances. Eligibility criteria and dollar amounts may change without notice. Always verify with the relevant government authority, your mortgage broker, or a licensed financial adviser before making decisions.