Why Now is One of the Best Times to Invest in Property — Despite Proposed Negative Gearing & CGT Changes
Australia’s property market is entering a critical turning point.
At the same time governments are considering changes to negative gearing and capital gains tax, the country is facing, what does property investment in Australia look like :
• A record housing shortage
• Rapid population growth
• Rising construction costs
• Increasing interest rates
• Tight rental markets
• Falling affordability to own or rent a property
Ironically, these combined factors are strengthening the long-term case for property investment — not weakening it.
Let’s look at the data for Australian Property Market Outlook.
🇦🇺 Australia’s Housing Target vs Reality
The Australian Government, through the National Housing Accord, has committed to:
1.2 million homes
Over 5 years (2024–2029)
This requires:
• 240,000 homes per year
• 20,000 homes per month
• 657 homes per day
This would represent the highest housing construction rate in Australian history.
However, the reality is Australian Property Market outlook is already falling short.
🏗️ How Many Homes Are Actually Being Built?
Latest figures show:
• 174,000 homes built last year
• Required: 240,000 homes
• Annual shortfall: ~66,000 homes
• 27% below target and tragically growing
Another dataset shows:
• 179,000 homes commenced in 2024–25
• Shortfall: ~61,000 homes in year one alone
This means Australia is already behind schedule. This number is already compounding.
📉 The Shortfall Is Growing — Not Shrinking
Recent data indicates:
• 81,000 homes already behind in first 15 months
• Monthly approvals ~17,500 vs 20,000 required
• Shortfall continuing to widen
Experts now estimate:
Up to 200,000 homes short by 2029
— even with government intervention. How will Capital Gains and Negative Gearing impact the market?
📊 The Problem Is Now Compounding
Because of early shortfalls, Australia must now build:
255,000 homes per year
Instead of the original 240,000 target.
This is happening while:
• Builder insolvencies are rising
• Labour shortages persist
• Construction costs remain elevated
• Planning delays continue
This makes catching up increasingly difficult.
👥 Population Growth Is Making It Worse
Australia’s population is growing rapidly:
• 500,000+ people per year
• 200,000+ new homes required annually just for population growth
• This does not include the existing housing shortage and interstate migration
This creates two layers of demand:
- Existing shortage
- Ongoing population growth
This compounds the housing deficit every year resulting in higher rents being charged.
📉 The Compounding Shortage
If Australia falls short by:
60,000 homes per year
Over 5 years:
300,000 homes missing
At the same time:
Population growth requires:
200,000 homes annually
Over 5 years:
1 million homes required
This creates a structural supply deficit and is Inflationary.
Why This Drives Property Prices & Rents Higher
When supply cannot meet demand:
• Vacancy rates fall
• Rents increase
• Buyers compete harder
• Investors return to market
• Prices for both Property and Rents rise
This is classic supply vs demand economics.
Now Add Proposed Negative Gearing & CGT Changes
This is where the timing becomes critical.
Proposed changes being discussed include:
• Limiting negative gearing
• Reducing Capital Gains Tax discount
• Targeting multiple property investors
• Removing some tax incentives
Independent modelling suggests:
Negative gearing changes could:
• Further Reduce construction by 45,000–46,000 homes
• Reduce GDP by billions
• Remove thousands of construction jobs
Capital gains tax changes could:
• Reduce supply by 12,000–33,000 homes
• Push rents 1–2% higher annually
In a market already undersupplied, this becomes significant.
Think about this : “When Investors leave the market, they in all likelihood will sell to an owner who wants to live there. This being the case, equates to even fewer Rental Properties on the market. Fewer Rentals in an already historically tight vacancy rates Australia wide, results in increased Rental Yields.”
Inflationary.
Investors Supply Most Rental Housing
A key fact often overlooked:
Private investors supply the majority of rental housing in Australia. A significant proportion of investors include lower paid industries such as police force & nurses — meaning these changes are significantly punitive on investors who need to plan financially, more so than higher income earning investors.
If investor incentives reduce:
• More Investors sell out and Fewer investors enter the market
• Fewer homes are funded
• Rental supply tightens
• Rents increase
This is basic market economics and highly inflationary. Probably adversely penalising the very voter the government is banking on to be reelected.
Rising Interest Rates Are Also Limiting Supply
Interest rate increases:
• Reduce borrowing capacity
• Make development harder
• Slow new construction
• Reduce supply further
This creates a paradox:
Higher rates designed to slow inflation
↓
Less construction
↓
Less supply
↓
Higher rents and prices
Rental Markets Are Already Under Pressure
Australia is already experiencing:
• Extremely low vacancy rates
• Rising rents
• Strong tenant demand
• Limited new supply
Paradox : ‘Reducing investor incentives risks worsening this situation.’
The Policy Paradox
These policies are often framed as:
“Punishing wealthy investors”
However, the likely impact is:
• Mum & Dad, nurses, police personal investors exit the market
• Wealthy investors restructure to avoid these proposed changes
• Rental supply falls
• Renters pay more
This creates a counterproductive outcome. All to fund Government overspend!
The Bigger Picture — Supply vs Demand
Australia’s property market fundamentals remain:
Demand Drivers:
• Population growth
• Migration
• Household formation
• Limited supply
Supply Constraints:
• Labour shortages
• Builder insolvencies
• Higher Construction costs; higher Land costs
• Planning delays
• Infrastructure bottlenecks
These are structural, long-term constraints. When demand exceeds supply, the principal of economics comes to the fore, resulting in further increases by the construction industry and suppliers of land. Inflationary.
Why This May Be A Strong Investment Window
When uncertainty increases:
• Some investors exit
• Competition reduces
• Opportunities improve
Meanwhile:
• Supply remains constrained
• Demand continues rising
• Rental pressure increases
This historically supports:
• Capital growth
• Rental growth
• Long-term investment performance = higher returns in your portfolio.
The Bottom Line
Australia Needs:
240,000 homes per year
Australia Is Building:
~174,000 homes per year
Annual Shortfall:
~60,000–70,000 homes
Projected 5-Year Shortfall:
200,000–300,000 homes
Meanwhile:
• Population growth continues
• Supply constraints persist
• Investor demand likely returns
• Rents expected to rise
Final Thoughts
Whether negative gearing and CGT changes occur or not, Australia faces:
• A structural housing shortage
• Rising population
• Tight rental markets
• Construction constraints
These are the core drivers of long-term property growth.
For informed investors, this may represent one of the most strategically important windows to enter the market.
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