Don't shut the gate: Fears tax reforms will lock down housing supply

AS the Federal Budget looms, the real estate sector is urging the Albanese government to retain existing tax arrangements and ramp up action to boost housing supply. The Real Estate Institute of Australia (REIA), the peak body for 85 per cent of real estate firms, has put proposed changes to capital gains tax on its Budget agenda, warning that any changes risk denting alreadysqueezed housing supply.

It cautions that there is an increased chance of policy change coming in the May 12 Budget. “In a market already facing chronic undersupply, any policy changes must be considered in the context of their impact on private investment and the delivery of new housing,” REIA President Jacob Caine said.

“The result of reducing the CGT discount or negative gearing will be a reduction in rental property investment. “This will lead to a contraction in the supply of rental properties putting upward pressure on rents, as fewer investors enter or remain in the market.” In March, the government confirmed DON’T SHUT THE GATE: Fears tax reforms will lock down housing supply Real estate agents are calling on the Federal Budget to retain existing capital gains tax rules and take action to increase housing supply By SAM McKEITH the Budget would deliver tax reform so property investors would want to invest in properties to add to the rental supply and then maintain the investments over the long term.

“We’ve seen a significant decline. If you look at the number of rental bonds held in terms of the number of rental providers in Victoria – and as we know vacancy rates are low,” Balazs said. “So we’re really calling for there to be incentives to add to the rental stock rather than at the moment a tax setting that is often viewed as being a disincentive.” A freeze on new taxes, and any legislation enabling tax changes, was urgently needed given “in the past five years there has been over 130 distinct new reforms in place”.

“The burden on rental providers, on property managers to keep up with all that, is making the situation particularly problematic,” he said. On the west coast, Real Estate Institute of Western Australia (REIWA) Deputy President Rob Mandanici said national housing issues were amplified in WA due to its unique market dynamics.

He pointed to the state’s large size, reliance on migration and the dominant mining sector. “It is essential the federal government is mindful that broad policy settings can have a more acute impact in WA than on other states or territories,” Mandanici said, highlighting investor taxation settings as a notable example.

Like the national body, the REIWA urged the Labor government to retain existing capital gains tax settings in order to safeguard property investment. “Stable tax settings are essential to maintain investor confidence. Any changes, even relatively modest ones, risk pushing investors out of the market at a time when we remain heavily reliant on them for rental supply,” Mandanici said.

“We know investors are sensitive to change. We know they will leave the market if the legislative environment does not support investment.” Ramping up supply was also high on the state’s wish list, with Mandanici describing bolstering the pipeline as the “greatest challenge facing the WA property market”.

After several years of completions below 20,000, new home completions in WA increased 15.6 per cent in the year to September 2025 to 22,049, according to the REIWA. However, “it remains below the 26,000 required under the National Housing Accord,” Mandanici said, adding that WA had seen several years of strong population growth meaning there was there would be tax changes announced in the Budget, but refused to be drawn on whether reform to the CGT discount was among them.

Chances of Budget action lifted when a parliamentary inquiry last month found the Howard-era settings were helping fuel intergenerational inequality in the property market. Caine said the proposals, led by the Greens, would worsen housing affordability against a backdrop of more rate rises likely on the way from the Reserve Bank of Australia.

“All four major banks are now expecting further rate increases through to at least May, particularly if underlying inflation remains elevated,” he said. An increasing number of economists predict the central bank to raise rates at least twice more this year after hiking by 25 basis points in March, taking the cash rate to 4.10 per cent.

More rate hikes are expected to add to a slowdown in housing market activity, especially in Melbourne and Sydney. Real Estate Institute of Victoria CEO Toby Balazs said the big hope was that Real Estate Institute of Australia President Jacob Caine. BUDGET 2026 SPOTLIGHT April 2026 The practitioner’s companionThe practitioner’s companion “The burden on rental providers, on property managers to keep up with all that, is making the situation particularly problematic.”

— Toby Balazs

Real Estate Institute of Tasmania President Russell Yaxley also put a focus on increasing supply. He urged the federal government to not just look at purchaser side assistance but also to place emphasis on “supply of actual homes being built”. “We hear a lot about affordability in political debate, but affordability follows supply,” Yaxley told AC.

“If you make it easier for people to buy without making it easier to build, you just push prices up another notch, which is what we have seen. “The Budget needs to back new housing delivery, fund the infrastructure that unlocks land, reward downsizing and maintain the settings that keep private investors engaged.” The issue of capital gains tax was also high on the state agenda.

Yaxley cited the possibility of CGT changes as a risk that would make private investment less attractive but without a credible plan to replace it. “Blunt changes to negative gearing or capital gains tax might sound appealing in a headline. But the modelling is consistent, pull back investors and you get fewer rental homes, fewer new homes and higher rents,” he said.

“Real Tasmanians wear that cost, that’s not a tradeoff I’m willing to accept without a fight. We now need a Budget that enables us to assist the supply side. “While the buyer side assistance has been well received, we can’t just answer one side of the story. We must fund both sides to ensure growth in both supply and demand.” Real Estate Institute of Victoria CEO Toby Balazs.

Hands off housing taxes, property experts warn ahead of Federal Budget AS Australia grapples with a housing crisis, property industry leaders are urging the federal government to prioritise housing supply and avoid tax changes that could deter investment in new homes. Ahead of the Budget, experts say boosting housing construction must remain the focus as demand continues to outpace supply across the country.

The federal government has flagged potential tax reform as a way to address intergenerational inequity, particularly the growing difficulty younger Australians face in entering the housing market. However, the industry is on alert amidst speculation Treasurer Jim Chalmers may reduce the capital gains tax discount or change negative gearing settings in his upcoming Budget.

Housing leaders warn that, with supply already constrained, the change risks undermining supply at a critical time. “We want to ensure we’re working on removing barriers to housing supply and certainly not introducing any regulation that gets in the way of that,” Housing Industry Association (HIA) managing director Jocelyn Martin said.

This includes any changes to the capital gains tax discount and negative gearing rules. “That’s not because we have any kind of philosophical support for investors per se, but investors are 42 per cent of the market of new homes,” Martin added. “If you take investors out of the market, you’re going to affect demand for new homes and also reduce homes made available to renters.” By MELISSA IARIA BUDGET 2026 SPOTLIGHT The Property Council of Australia also cautions against adding new costs or complexity at a time when construction and financing pressures are high.

“The Budget should focus squarely on improving the conditions to deliver more housing,” said Matthew Kandelaars, Property Council group executive of policy and advocacy. “That means stable, competitive tax and investment settings, faster planning and postpermit delivery and targeted investment in housingenabling infrastructure like transport, utilities and services.” To improve affordability and lift supply, Kandelaars said governments must clear bottlenecks and support productivity in construction, including through skills and migration settings, so approved projects can actually get built.

Last month, Real Estate Institute of Australia President Jacob Caine told a conference that raising taxes on housing would reduce supply. “What that translates into is fewer homes being built, fewer jobs in construction and, most significantly, an increase in rents,” Caine said. A key priority is more federal funding for infrastructure.

The HIA is calling for an extra $5 billion to support states in delivering critical “last mile” infrastructure - including water, sewerage and powerto unlock housing developments. “That might be an incentivised system, a bit like they have now, but nevertheless, it’s something that’s really needed to boost new housing in the states,” Martin said.

“We have housing estates that can’t either get started or finished because they’re missing services. “The states, who are providers of infrastructure, just don’t seem to have enough funds to do enough of that work.” Despite a Housing Accord target to build 1.2 million homes by mid-2029, Australia is falling short, even after initiatives to boost supply and affordability.

Only 219,000 new homes were built in the first five quarters of the agreement, less than the required 280,000 new homes, the National Housing Supply and Affordability Council revealed last month. While the nation is below the required pace, Martin said the target had been valuable in exposing the factors holding back building.

One reason for the shortfall is the apartment market, which won’t be helped by rising interest rates and fuel squeezes. “Apartments, at the moment, are not passing the feasibility test to even get out of the ground,” she said. “We’re short of (the target) but still supportive of it.

We reckon by about 2030 we’ll probably be building the right amount of homes per year.” Workforce shortages must be addressed, Martin said, highlighting that permanent support for employers hiring apprenticeships for housing construction would help create the skilled labour needed.

Overall, though, states have improved their planning systems to prioritise housing supply, leading to greater confidence from the private sector, according to Urban Taskforce CEO Tom Forrest. However, he points out the high cost of building remains an issue, particularly “We need the government to put its hand in its pocket, which is swollen in terms of revenue through the large numbers of immigration intake.”

— Urban Taskforce CEO Tom Forrest

BUDGET 2026 SPOTLIGHT April 2026