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In a joint statement, the Housing Industry Association, Master Builders Australia, Property Council of Australia, and Real Estate Institute of Australia urged the government to maintain current tax settings, saying that increased investor costs would directly impact new housing delivery.
The groups cautioned that reducing capital gains tax (CGT) concessions or scaling back negative gearing would likely shrink rental supply and push rents higher, while overlooking the role of private investment in addressing the housing shortfall.
“At a time of elevated interest rates, global uncertainty, and an entrenched housing shortage, policy settings should be focused on accelerating supply,” the statement said.
“Measures that inadvertently reduce project viability or investor participation risk slowing the pipeline of new housing.”
Brokers have also raised concerns over potential changes to the tax discount. Alex Veljancevski, director of Eventus Financial, warned that removing or reducing the discount could have flow-on effects for rental markets.
“If the discount were removed or significantly reduced, it would likely dampen investor confidence and reduce participation, particularly in higher-risk or lower-yield markets. The more immediate impact of that would be on rental supply, which is already under pressure in many parts of the country,” Veljancevski said.
Potential changes afoot
The warning comes amid speculation that changes to CGT and negative gearing could be announced in the May 2026 federal budget.
In a radio interview, Labor’s Finance Minister Katy Gallagher recently said: “We are interested in responding to some of the intergenerational issues around housing, and capital gains tax comes up as one of those issues.”
This consideration follows a recent Senate inquiry that found the CGT discount favours capital over labour, influences investor behaviour, and directs investment toward existing dwellings rather than new supply. The inquiry also noted that, when combined with negative gearing, current settings may contribute to affordability pressures by shifting ownership toward investors.
However, modelling commissioned by the industry bodies from Qaive and Tulipwood Economics suggests that removing or reducing these incentives would increase holding costs for investors and translate into higher rents.
The analysis found investor appetite is closely linked to rental supply, warning that policy changes aimed at boosting home ownership could have unintended consequences for renters.
“Reducing the rental pool to expand ownership risks disproportionately impacting those unable to transition into the property market,” the report stated.
The modelling estimates that cutting the CGT discount to 25 per cent and restricting negative gearing to a single property could reduce GDP by more than $3 billion and result in nearly 46,000 fewer housing starts.
Another recent report found that changes to CGTD could push one in three investors to sell their properties, putting pressure on an already tight rental market.
Industry groups instead called for a supply-led policy approach, reiterating support for the National Housing Accord target of 1.2 million new homes.
“Private investors fund a significant share of new housing supply and remain a critical component of the solution,” the statement said.
“Housing policy needs to support, not deter, the capital required to deliver new stock.”
[Related: Westpac updates investor policy offering]
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