Latest / The Front / Landlords pull a giant u-turn on investment

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Landlords pull a giant u-turn on investment · The Front

• 0:03
  Speaker 1: From The Australian, here's what's on the front. I'm Claire Harvey.
• 0:06
  Speaker 2: It's Wednesday, October 14, 2026. Budget changes have shaken everything
• 0:14
  Speaker 2: up in the property sector, especially for investors. It's sent
• 0:18
  Speaker 2: them searching for a totally different kind of property to buy.
• 0:22
  Speaker 2: And today we're examining what that means for owners, renters
• 0:26
  Speaker 2: and the price of all our places. Mackenzie Scott is
• 0:30
  Speaker 2: here in just a moment.
• 0:38
  Speaker 3: Property investors are really changing the game on what they're
• 0:41
  Speaker 3: looking for. It's no longer about just buying the cheapest
• 0:45
  Speaker 3: property to pop it onto the market.
• 0:48
  Speaker 1: This is The Australian's housing reporter, Mackenzie Scott.
• 0:52
  Speaker 3: They're actually being really strategic and looking for a completely
• 0:55
  Speaker 3: different type of property than they were before. One that
• 0:58
  Speaker 3: can give them really strong returns because that's the only
• 1:01
  Speaker 3: way that you can offset the negative gearing changes that
• 1:04
  Speaker 3: came through earlier this year.
• 1:06
  Speaker 2: The first fallouts of the federal budget which are driving
• 1:09
  Speaker 2: buyer uncertainty... sharpest monthly fall in house prices.
• 1:12
  Speaker 1: rents are at record highs.
• 1:14
  Speaker 2: reporting its worst auction clearance rates in nearly a decade. Macca,
• 1:23
  Speaker 2: you've been attending some auctions and open homes. What's going
• 1:27
  Speaker 2: on out there?
• 1:28
  Speaker 3: In the past few weeks, I've been to two auctions,
• 1:31
  Speaker 3: a luxury knockdown rebuild on the north side of Brisbane.
• 1:34
  Speaker 3: One of them... packed room, people coming from all around,
• 1:38
  Speaker 3: not a single bid, one around the corner a few
• 1:40
  Speaker 3: weeks later, couple of bids, got up there, bit of negotiation,
• 1:45
  Speaker 3: passed in, neither have sold. And that seems like that's
• 1:49
  Speaker 3: the situation at the moment.
• 1:50
  Speaker 2: Yeah, that's a horrifying prospect for vendors, isn't it? Because
• 1:53
  Speaker 2: you go through all the emotional upheaval of getting a
• 1:56
  Speaker 2: house ready for sale and throwing an auction is like
• 1:58
  Speaker 2: throwing a party and you're terrified nobody's going to come.
• 2:00
  Speaker 1: Yeah. I feel for them.
• 2:02
  Speaker 3: Absolutely. And who knows how long it's going to take
• 2:05
  Speaker 3: for these to actually sell.
• 2:07
  Speaker 2: What's going on there in the cases of these places
• 2:09
  Speaker 2: that you went to? What was the issue, do you think?
• 2:12
  Speaker 2: And what can we draw from that about the wider
• 2:14
  Speaker 2: housing market?
• 2:15
  Speaker 3: I think it's an example of just consumer sentiment, especially
• 2:18
  Speaker 3: at the more expensive end of the market, the top 25%
• 2:22
  Speaker 3: of the market. That's where we're seeing a majority of
• 2:25
  Speaker 3: these price declines. We are seeing some confidence in the
• 2:28
  Speaker 3: middle market of upsizers who are taking advantage of the falls.
• 2:32
  Speaker 3: They can sort of cash in all the money they've
• 2:35
  Speaker 3: made over the last couple of years and get something,
• 2:39
  Speaker 3: probably a bit of a discount. Whereas the bottom end
• 2:41
  Speaker 3: of the market, the more affordable end, we're not seeing
• 2:44
  Speaker 3: first home buyers really trying to get ahead. And the
• 2:48
  Speaker 3: ones that are, are competing with the only investors in
• 2:52
  Speaker 3: the market. So that portion is actually still performing quite well.
• 3:00
  Speaker 2: OK, so let's take it back to May 2026, which
• 3:02
  Speaker 2: is when everything changed. Jim Chalmers, the Treasurer, announced big
• 3:05
  Speaker 2: changes to negative gearing and to capital gains tax.
• 3:09
  Speaker 4: We'll limit negative gearing for residential property to new bills
• 3:12
  Speaker 4: from July next year. And we're replacing the 50% capital
• 3:17
  Speaker 4: gains tax discount with inflation-adjusted indexation to restore the taxation
• 3:22
  Speaker 4: of real gains.
• 3:25
  Speaker 2: Let's break that down for an individual buyer. If you
• 3:28
  Speaker 2: had an existing rental property, the negative gearing changes wouldn't
• 3:31
  Speaker 2: affect you. You'd still be able to negatively gear that
• 3:34
  Speaker 2: rent that you were earning. But now let's say the
• 3:36
  Speaker 2: bank is willing to give you a mortgage and you're
• 3:38
  Speaker 2: looking for a property to buy so that you could
• 3:40
  Speaker 2: rent it out. Once upon a time, it would have
• 3:43
  Speaker 2: been a good consideration to buy something where you could
• 3:45
  Speaker 2: basically make a loss. Now that's just not the case
• 3:48
  Speaker 2: at all.
• 3:49
  Speaker 3: Absolutely. And you've got to remember that mortgage rates are higher, again,
• 3:53
  Speaker 3: for investors. So talking to property investment experts, they're pretty
• 3:58
  Speaker 3: much saying, if you're a new investor in the market,
• 4:01
  Speaker 3: you must be pretty willing to absorb $ 20, 000 plus each
• 4:05
  Speaker 3: year in holding costs. If you don't have $ 20, 000 lying
• 4:10
  Speaker 3: around on top of everything else you're laying out, probably
• 4:15
  Speaker 3: property investment isn't for you.
• 4:16
  Speaker 4: Wow.
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  Speaker 2: So would that include things like insurances, which we know
• 4:20
  Speaker 2: are one of the major drivers of the rising cost
• 4:21
  Speaker 2: of living?
• 4:22
  Speaker 4: Yeah.
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  Speaker 3: Insurances, landlord insurance, strata fees, which they have all their own,
• 4:27
  Speaker 3: building insurances. There's just so many considerations and outgoing costs.
• 4:34
  Speaker 3: Then you have your water bill and just that interest
• 4:37
  Speaker 3: bill that keeps going ever higher and may go higher
• 4:41
  Speaker 3: again come November.
• 4:42
  Speaker 1: So how does that change my decision? I think it's
• 4:45
  Speaker 1: going to.
• 4:45
  Speaker 3: Push people towards cheaper areas where that yield is typically higher.
• 4:50
  Speaker 3: It won't just be, let's find something cheap and it'll be,
• 4:54
  Speaker 3: let's find something where I know I can get a
• 4:57
  Speaker 3: good return for the cheapest price possible. So you're trying
• 5:01
  Speaker 3: to find something well located to meet both those demands.
• 5:06
  Speaker 2: And so what does that do to people who are
• 5:08
  Speaker 2: trying to rent a place? I mean, rents have already
• 5:11
  Speaker 2: spent the past five years rising and rising. We see
• 5:14
  Speaker 2: queues around the block for open homes, whenever a rental
• 5:17
  Speaker 2: property is advertised, it already feels pretty tight.
• 5:20
  Speaker 3: The problem we have with rental data is it's not
• 5:23
  Speaker 3: as available as we have in the selling market. People
• 5:26
  Speaker 3: have private rental agreements where prices can go up X
• 5:30
  Speaker 3: amount and no one knows about it. So we can
• 5:33
  Speaker 3: only base it on what the advertised asking rate is.
• 5:37
  Speaker 3: So the latest data from realestate.com.au suggests that over the
• 5:41
  Speaker 3: September quarter, we've seen a $ 10 per week average rental increase,
• 5:46
  Speaker 3: which let's not forget, Labor said that would probably be
• 5:49
  Speaker 3: a $ 2 increase from these negative gearing changes. From a
• 5:53
  Speaker 3: vacancy point of view, vacancy has eased a little bit.
• 5:57
  Speaker 3: But that being said, we're still looking at 1.3% to 1.5%
• 6:01
  Speaker 3: in our major capital cities. A healthy, quote, healthy rental
• 6:07
  Speaker 3: market should be around 3% to give people wiggle room
• 6:10
  Speaker 3: to negotiate and find places to live for work and
• 6:14
  Speaker 3: for play. So we're in a bit of a wait
• 6:17
  Speaker 3: and see sort of situation to sort of understand what
• 6:20
  Speaker 3: the true impacts of these changes will be, particularly given
• 6:24
  Speaker 3: that most states have 12-month rules around rental increases for properties.
• 6:30
  Speaker 3: So it may take 12 to 18 months to get
• 6:33
  Speaker 3: the true impact of this negative gearing reform.
• 6:35
  Speaker 2: Music One of the things that the government was trying
• 6:41
  Speaker 2: to achieve, and I think even senior government ministers would
• 6:44
  Speaker 2: admit that they've put themselves through months and months of
• 6:46
  Speaker 2: pain to try to get to this result, was to.
• 6:50
  Speaker 1: Get young Australians into homes of their own.
• 6:52
  Speaker 2: Into their first home. So instead of paying off someone
• 6:56
  Speaker 2: else's mortgage, you can pay off your own. And part
• 7:00
  Speaker 2: of that was encouraging new builds. That's why the new
• 7:04
  Speaker 2: rules didn't apply to new builds. And we are seeing
• 7:07
  Speaker 2: some additional investor interest in new build apartments and homes.
• 7:11
  Speaker 1: What does that mean?
• 7:12
  Speaker 2: Is it actually going to achieve what the government said
• 7:14
  Speaker 2: that it wanted to do, which is prompt the development
• 7:17
  Speaker 2: of more new homes?
• 7:18
  Speaker 3: Again, I think it is going to take a little
• 7:20
  Speaker 3: bit of time. So the government's budget document suggested that
• 7:24
  Speaker 3: these changes alone would deliver 35,000 fewer properties than if
• 7:28
  Speaker 3: they hadn't brought these changes in. And let's not forget
• 7:31
  Speaker 3: the ban on allowing self-managed super funds to borrow to
• 7:34
  Speaker 3: buy property was never modelled. So we don't know what
• 7:37
  Speaker 3: the impact of that element will have on the market either.
• 7:40
  Speaker 3: So property industry associations are saying that new home sales
• 7:45
  Speaker 3: are really struggling at the moment. Property developers are having
• 7:49
  Speaker 3: trouble convincing buyers to purchase a home to then make
• 7:53
  Speaker 3: building it even stack up. So I think what we're
• 7:57
  Speaker 3: seeing at the moment with property completions and approvals is
• 8:01
  Speaker 3: that hangover from the start of the year, and it's
• 8:03
  Speaker 3: going to be really interesting throughout the next few quarters
• 8:08
  Speaker 3: to see what the true impact of these changes will
• 8:10
  Speaker 3: mean for newly developed homes.
• 8:13
  Speaker 2: Scarcity, of course, means that the price goes up. So
• 8:16
  Speaker 2: we can probably assume that rents are not going to
• 8:19
  Speaker 2: go down anytime soon. The people who are renting, many
• 8:22
  Speaker 2: of them are those first home buyers who the government
• 8:25
  Speaker 2: wants to get into the purchasing market. How on earth
• 8:28
  Speaker 2: does anyone save for a home when they're paying 30%
• 8:30
  Speaker 2: or more of their income on rent?
• 8:32
  Speaker 3: That's the question, Claire. And they're also trying to save...
• 8:36
  Speaker 3: as interest rates are going up, which is eroding their
• 8:38
  Speaker 3: ability to borrow. There's been some analysis by Lendi, which
• 8:41
  Speaker 3: suggests that any affordability gains from falling prices has already
• 8:46
  Speaker 3: been eroded by the increases in interest rates. So first
• 8:50
  Speaker 3: home buyers are back to square one. There's been no
• 8:52
  Speaker 3: improvement in their situation to get into the market. At
• 8:56
  Speaker 3: the same time, consumer sentiment is also at near record lows.
• 9:00
  Speaker 3: No one wants to catch a falling knife and first
• 9:03
  Speaker 3: home buyers are just waiting on the sidelines at the
• 9:06
  Speaker 3: moment so that they don't buy and then see their
• 9:09
  Speaker 3: largest asset decrease in value for who knows how long.
• 9:17
  Speaker 2: The fact that the negative gearing changes were grandfathered, so
• 9:19
  Speaker 2: if you owned a property before budget night or you
• 9:22
  Speaker 2: were in contract to buy it on budget night, this
• 9:25
  Speaker 2: change doesn't apply to you. You can still negatively gear it.
• 9:27
  Speaker 2: Does that mean that people are sort of hoarding and
• 9:30
  Speaker 2: not selling properties that they once might have thought about
• 9:33
  Speaker 2: putting on the market, you know, around this time?
• 9:35
  Speaker 1: Potentially.
• 9:36
  Speaker 3: There was some data out from PropTrack earlier this week,
• 9:39
  Speaker 3: which suggests that we haven't really seen a massive sell-up
• 9:44
  Speaker 3: in investment properties yet. But let's not forget the changes
• 9:48
  Speaker 3: to capital gains tax do not come into effect until
• 9:51
  Speaker 3: mid next year. So we may start to see early
• 9:54
  Speaker 3: next year, more investors sell up in order to beat
• 9:58
  Speaker 3: the additional taxes they have to pay. pay from the
• 10:00
  Speaker 3: next financial year. I think it'll be really interesting that
• 10:04
  Speaker 3: as these changes to capital gains start to flow through
• 10:07
  Speaker 3: the market from next financial year, that's when a lot
• 10:10
  Speaker 3: of economists are expecting this current downturn to sort of
• 10:14
  Speaker 3: stabilize and bottom out. So we could be starting to
• 10:18
  Speaker 3: see price increases from the end of next year. And
• 10:23
  Speaker 3: that's going to be really interesting, given that an election
• 10:26
  Speaker 3: could be called from that point.
• 10:28
  Speaker 2: Well, that's such a double-edged sword for the government, isn't it?
• 10:31
  Speaker 2: Of course, existing homeowners want the value of their asset
• 10:34
  Speaker 2: to go up, unless, of course, they're thinking they're worrying
• 10:36
  Speaker 2: about whether their children will ever be able to buy
• 10:39
  Speaker 2: a home, in which case they want prices to come down.
• 10:42
  Speaker 2: The government won't say out loud that it wants to
• 10:45
  Speaker 2: depress housing prices, but You've got to think that that
• 10:49
  Speaker 2: was part of the plan all along and that that
• 10:51
  Speaker 2: is actually what they do want. How does that play
• 10:54
  Speaker 2: out politically in the minds of the people who you're
• 10:56
  Speaker 2: seeing at those auctions?
• 10:58
  Speaker 3: I guess that's part of the fun, isn't it? The
• 11:00
  Speaker 3: fun of politics is I genuinely don't know how this
• 11:03
  Speaker 3: will play out for them. It'll be a really difficult sell,
• 11:07
  Speaker 3: particularly given that Angus Taylor has committed to reversing all
• 11:11
  Speaker 3: of these changes.
• 11:13
  Speaker 2: We are dead against this and we'll do whatever we
• 11:16
  Speaker 2: have to do to ensure that these taxes are not
• 11:18
  Speaker 2: imposed on Australians.
• 11:21
  Speaker 3: So it'll really come down to what Australians really want.
• 11:25
  Speaker 3: Do they want cheaper house prices or do they want
• 11:28
  Speaker 3: the status quo?
• 11:29
  Speaker 2: Yeah, one of the points that's been raised over the
• 11:31
  Speaker 2: months since the budget is that housing is different to
• 11:34
  Speaker 2: other kinds of asset classes, certainly in the minds of Australians.
• 11:37
  Speaker 2: We have a big emotional attachment to the family home.
• 11:40
  Speaker 2: And although we might see a rental property that we
• 11:42
  Speaker 2: might invest in ourselves as an asset, we certainly don't
• 11:45
  Speaker 2: consider the family home that way.
• 11:47
  Speaker 1: Do you think that's been borne out? Is that true?
• 11:50
  Speaker 2: Or do you think that Australians are much more concerned
• 11:53
  Speaker 2: about how much that family home is worth than maybe
• 11:55
  Speaker 2: the government thought?
• 11:56
  Speaker 1: I think it's a bit of A, bit of B.
• 11:58
  Speaker 3: Australians take a lot of pride in their homes. It's
• 12:00
  Speaker 3: why we see so much spending on renovations. But they also,
• 12:03
  Speaker 3: I think, recognise that the homes cost a lot of
• 12:06
  Speaker 3: money these days. There's a lot of discussions around baby
• 12:10
  Speaker 3: boomers paying 17%, 18% on their home loans back in
• 12:14
  Speaker 3: the 1980s.
• 12:15
  Speaker 1: Are you sick of hearing about that?
• 12:18
  Speaker 3: Well, we also have to remember that the burden is
• 12:20
  Speaker 3: very similar for today's generation, just given the cost of
• 12:24
  Speaker 3: homes and housing. the multiple they are paying above their incomes.
• 12:28
  Speaker 2: Yeah.
• 12:28
  Speaker 1: So the house doesn't cost 35 grand anymore.
• 12:30
  Speaker 2: No.
• 12:30
  Speaker 1: It costs 750 grand.
• 12:31
  Speaker 2: Yeah.
• 12:32
  Speaker 3: It's not 35 grand on the button. Trust me. Given
• 12:36
  Speaker 3: the incredible financial commitment housing is, I think a lot
• 12:41
  Speaker 3: of Australians do watch that number quite closely. It's why
• 12:44
  Speaker 3: every housing platform these days has a price tracker because
• 12:47
  Speaker 3: people like to know that their wealth isn't going down,
• 12:51
  Speaker 3: especially when cost of living is so high and people
• 12:55
  Speaker 3: are working extra hours. They want to know that every
• 12:58
  Speaker 3: little bit is making a difference.
• 13:03
  Speaker 1: Mackenzie Scott, thank you very much.
• 13:05
  Speaker 3: My pleasure.
• 13:10
  Speaker 2: Mackenzie Scott is The Australian's housing reporter. You can read
• 13:13
  Speaker 2: all the latest right now at theaustralian.com.au.