CANBERRA, AUSTRALIA / RankWire.AI / – Australia’s property tax changes have sharpened debate over rental costs after new bank analysis examined the returns required by housing investors. National Australia Bank calculated that rents would need to rise by about 25% to 30% if gross rental yields moved from roughly 3.5% to 4.5%. The calculation assumes property prices remain unchanged. The bank has stressed that the figure represents a yield calculation rather than a forecast for Australian rents.
The changes will reshape tax treatment for some residential property investors from July 1, 2027. Negative gearing will become limited to newly built homes for purchases covered by the new rules. Investors who held properties before 7:30 p.m. AEST on May 12, 2026 will keep existing arrangements. Buyers of established properties after that cutoff cannot deduct residential property losses from salary income. They can continue using those losses against residential property income and can carry unused losses forward.
Australia will also change the way capital gains receive tax concessions from July 2027. The existing 50% capital gains tax discount will shift to a system using inflation-adjusted cost bases and a 30% minimum tax on real gains. Transitional arrangements apply to gains built up before the new rules begin. Buyers of newly constructed homes can choose between the existing discount and the replacement system. Parliament approved the legislation in June, making the measures part of the federal tax framework.
Government modelling shows smaller direct rent effect
Australian Treasury modelling points to a much smaller direct increase in rents from the tax measures. The estimate puts the effect at about A$2 a week for a median rental property. Treasury’s calculation reflects the decision to preserve existing tax treatment for investments held before the May budget announcement. The modelling also estimates that home prices will grow about 2% less than they otherwise would. That figure refers to slower price growth and does not represent a forecast for a nationwide fall.
National Australia Bank’s broader housing research shows that rental conditions remain tight across major cities. The bank reported low vacancy rates and elevated advertised rent growth in its latest housing analysis. It also found that the tax changes raise the rental yields required by leveraged investors seeking similar after-tax returns. A post-budget property survey placed expected rental growth at 3.9% over the following year. That compared with an earlier expectation of 3.1%.
Sydney and Melbourne remain central to rental debate
Housing prices have also weakened in several major markets while rental supply remains constrained. Sydney dwelling prices fell 1.4% in July from the previous month, while Melbourne prices dropped 1.2%. Both markets stood about 5% below their recent peaks. The same housing data showed weaker prices spreading to Perth, Brisbane and Adelaide. Rental vacancy rates remained near historic lows at about 1.7%. Advertised rents were growing at an annualised rate of about 5.8% over six months in July.
The rent figures now shaping the debate measure different aspects of the housing market. The 25% to 30% number reflects a mathematical yield scenario that holds property values constant. It does not predict a 30% rise in rents. Treasury’s roughly A$2 weekly estimate measures the government’s projected direct effect from the tax changes. Both figures sit against a market marked by tight vacancies and strong rental growth. The new property tax rules start on July 1, 2027, with grandfathering for eligible existing investments.