A new negative gearing scare campaign emerges

Economists warn that the Albanese government’s removal of key investor tax concessions (negative gearing on existing homes and the 50% CGT discount) could force rents up 15–30% over the next two years, far above Treasury’s estimate of $2 a week, adding substantial pressure to inflation at a time when underlying inflation has already sat outside the RBA’s 2–3% band for most of the government’s term.

Banks, analysts and property researchers argue that investors will demand higher rental yields to offset the loss of tax benefits abolished in the government’s recent housing reforms. NAB and SQM Research estimate this requires a 1–1.5 percentage‑point increase in yields, which—if house prices stay flat—equates to 25–30% rent increases.

“In our view, the changes to the tax settings for investors in existing dwellings imply that gross rental yields will need to rise in order to compensate for the loss of tax benefits”, said NAB’s head of Australian economics, Gareth Spence. “For investment properties in Sydney and Melbourne, a rise in the rental yield of 1 percentage point from about 3.5% to around 4.5% implies an increase in rents of 25% to 30%, assuming the current level of house prices is unchanged”.