Residential property’s immediate negative gearing reaction

Mike Taylor

Managing Editor and Publisher

22 July 2026

A new survey conducted by the Australian Property Institute (API) has confirmed the impact of the Government’s Budget tax changes, particularly capital gains tax (CGT) and negative gearing.

The API’s third quarter Australian Property Market Outlook based on a survey of 265 property professionals from early June to early July has found that the changes to negative gearing are the mostly widely cited factor responsible for downward pressure on residential prices.

It found that 82% of respondents cited the changes to negative gearing, compared to 77% for the changes to CGT and 77% for the interest rate outlook.

The API analysis said that while the interest rate outlook remains a commonly agreed source of downward pressure across every asset class, for the first time it is not topping the list in the residential market.

The analysis said that while the Budget changes do not take effect until 1 July, next year, the market is not waiting with residential sentiment recording the steepest fall of any asset class dropping from 6.0 to 5.0 on the API’s 10 point scale.

Commenting on the survey findings, API chief economist, Dr Sherman Chan said it represented the first time the professionals who value residential property for a living have been surveyed on the impact of the Budget changes.

“Their message is clear: the market is pricing these reforms now, more than a year before they begin,” he said.

The survey found a striking asymmetry in expectations: consensus on who will be worse off, and no consensus that anyone will be better off. Some 62% of respondents expect the capital gains tax reform to make housing more unaffordable for renters, and 63% expect the same from the negative gearing changes.

Views on whether home buyers will benefit fell short of consensus (46 and 48 per cent), and there is no consensus the reforms will achieve their stated purpose of boosting supply.

More respondents believe the CGT reform will reduce new housing supply beyond July 2027 (34 per cent) than believe it will increase it (23 per cent). For the negative gearing reform, 31 per cent expect supply to fall against 28 per cent who expect it to rise.

“The reforms were introduced to support first home buyers and stimulate new housing supply. The professionals closest to the market are not convinced the supply will materialise, but they are convinced that renters will be worse off,” Chan said.