The 2026 Budget is Here and it is Significant for Propertyland.

Changes to the tax system always have unexpected consequences.

How will this affect you?

Ultimately property prices are the result of the balance between supply and demand. The budget papers themselves yesterday estimate that the tax changes will reduce housing supply by 35,000 homes over a decade. This along with the governments own rising immigration forecasts, means that the lack of housing supply is not being fixed anytime soon.    

For various reasons, the property market generally has already corrected Australia wide over the past 3 months.   Perhaps there is still some to go, but if you are looking in the market for a home now, don't listen to the doomsayers and keep going, ultimately we still have too many people and not enough houses.   In times of change and uncertainty, wealth is built.

The capital gains and negative gearing tax changes are being widely reported on this morning so I wont repeat them here, but in my view, this is what rational decisions I believe people will start making:

• Watch people invest more in their (tax free) family home rather than buy an investment property - think second storeys, granny flats.

• Watch more people invest in their superannuation - through an increase to contributions and borrowing to purchase property inside superannuation.

• Watch regional areas become more attractive now as an investment with higher rental yield (ie higher rents relative to the price of the property), much to the detriment of regional young people trying to buy homes.

• Will rents go up as new (younger) landlords cannot pass on the tax benefits of negative gearing - or will property prices fall, or a bit of both?

• Will people negatively gear share portfolios instead? (that doesn’t appear to be caught up in the new rules)

• Lets say someone buys a new property for investment purposes (as the tax changes have now directed an investor to do), as opposed to an existing home.  Where is it going to be affordable, who is going to rent it and how much will it rent for? (Hint, it wont be within 10 km of a CBD).

• Older investors already owning investment properties have the benefit of their tax benefits being quarantined, younger people trying to get ahead will not (sorry but that sucks).  Properties held under the old system have a disproportionate benefit and will likely be held for much longer.

In the next 12 months of transition - watch for investors who were going to sell in 2-3 years anyway bring forward the sale.  

Meanwhile in this backdrop, the price of oil remains high and now also fertiliser and the flow on effect to inflation - higher interest rates mean lower borrowing capacity.  Its going to be an interesting 12 months in propertyland.

Questions?  We are here to discuss what all this means for you personally and what you can do about it.

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That’s it for this week.

Keep showing up and keep cheering each other on — life is better when we support each other.

Reggie and the Thunderbolt Team