Latest / The Follio Property Podcast / How Investor Taxes & Rate Hikes Risk a Housing Market Collapse? | Australia Housing Crisis 2026

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How Investor Taxes & Rate Hikes Risk a Housing Market Collapse? | Australia Housing Crisis 2026 · The Follio Property Podcast

• 0:01
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• 0:26
  Australian mortgage holders' worst fears have been confirmed with the Reserve Bank hiking rates for the first time in more than two years. But we've built the foundations for future growth. Things are on the up. And is that 1.2 million target still standing? It certainly does still stand.
• 0:41
  What a disgrace, Rhys. You've got a government at the moment that's incompetent at solving this housing crisis. And then when we've got this government that now want to tax that portion of the market that's actually helping solve this housing problem, I'm frustrated they're even considering it. Sydney is very vulnerable to cash rate increases. If you pull investors out, you are taking thousands of rental properties off the market. Rental prices are 44% up. What's that going to do to rents? It's going to increase rents, making housing supply less achievable than it has been in the past.
• 1:10
  Perth's the leader, 2%. Brisbane, the market just doesn't slow down. 1.6%, 35% of the market is selling on a weekly basis. And we're closing in on that quicker than I think anyone anticipated. When demand and supply are balanced and there's no affordability, well, that's when we might see prices stagnate and potentially fall. 2026 cash flow is going to get harder. People will prematurely have to sell it.
• 1:33
  You're listening to the Folio Property Podcast. I'm Rhys Beddell and I'm here each week with my co-host, Lachlan Delahunty. Lachlan, we did it. We've launched the National Investment Report. There's going to be a link in the show notes. Scan the QR code if you're watching it on YouTube as well, on the TV. A lot of people do this. That's the insights that I'm looking at weekly. So we've put that together from our chief economist to be able to come up with, I guess, the data that we're looking at to make decisions for our clients and for ourselves personally. Awesome.
• 2:02
  What we want to do today is go through some of those data sets, but also touch on some very topical things in the news to do with property and Australia particularly, because it's been a busy couple of weeks. So let's kickstart it with the most topical one that's all through our news feeds at the moment, capital gains. Surely the government aren't realistically putting this forward, Rhys.
• 2:23
  It's a disgrace. The most topical thing in all of our feeds, whether we're in the industry or not, is capital gains. So particularly on the exemption that investors will get, it's 50%, I believe, if they've owned it longer than 12 months. Correct, after 12 months. A lot of commentary around potentially halving it or at least some sort of reduction in that. Or removing it altogether. Correct. What is your opinion on capital gains and what's the origin of capital gains? Yeah.
• 2:48
  Firstly, what a disgrace our government is for even considering this race. You've got a government at the moment that's incompetent at solving this housing crisis. They come into the election last year with all these promises and have delivered absolutely nothing. We've got a government that's let 1.3 million people into our country in the last three years and done nothing to accommodate these people in terms of housing supply.
• 3:12
  Then you've got a segment of the market, typically about 30% of transactions are investor base. You've got a segment of the market that is doing what they can to bring on more housing supply. And that's the investor market. Whether people agree with it or not, or if it's capitalism or not, investors bring on more supply into the market. Because a large portion of investment activity is in that off the plan house and land package area, which is creating more land, more allotments, and therefore more housing for Australia.
• 3:41
  And then when we've got this moronic government that now want to tax that portion of the market that's actually helping solve this housing problem, they want to tax it for it. Hey, thank you for bringing on more housing supply. Thank you for participating in our economy. But now, hey, we're going to tax you for that. What a disgrace, Rhys. I'm livid. I'm frustrated they're even considering it. And I think we should band together in the industry –
• 4:08
  to put a stop to this because you are going to find this will have an impact on the market. This will have impact on investors. And if you pull investors out, you are taking thousands of rental properties off the market. Rental figures, which we'll discuss today, are at their peaks, am I correct? Correct. They're surging to their peaks. They're up 44%. So you've got rental prices of 44% up. And now you're going to take investors out of the market. What's that going to do to rents? It's going to increase rents, making housing supply less expensive.
• 4:37
  achievable than it has been in the past. So yeah, fair to say I was extremely disappointed and let down by our government in so many different ways this year already. We're only midway through February. So I hope much like when they threw in the ring, let's get rid of negative gearing. I hope this gets squashed as quickly as that did. And it's the sole reason they lost the last election.
• 4:59
  I think I need a cold shower after that, Lachlan. That was a very passionate explanation. So I'd love to get feedback in the comments whether you agree with Lachlan or I'm sure we'll be divided with that statement. But the other thing in the news as well, which I don't know if there's any correlation to this latest sort of
• 5:14
  media roundup on the CGT was inflation's ticked back up and we subsequently, you actually predicted two rate rises I think this year on an episode at the start of the year. We saw our first one the beginning of February. That's when the futures factored in a reduction in interest rates so balls were on the line with that one and we've seen it go up already.
• 5:32
  And we're ticking up to 3.5% now for inflation. It's been ticking up since mid last year as well, sort of towards the back end. With that interest rate, what are you seeing in the market at the moment? Is that having any impact? So you're looking at some of the data we're going to go through across the board and the big players, the big capital cities, when I say big, I'm talking the big movers. So your Perth, your Adelaide, your Brisbane, didn't slow them down at all. Are we starting to, will that have any pressure in terms of affordability in other markets?
• 6:02
  Not in the short term and that's why when we go back to our 2026 forecast, the first six months of this year are going to be extremely bullish because of the significant undersupply. And until we start to see that balance out, I don't see the cost of money having a huge influence on these markets. I do think Sydney is very vulnerable to cash rate increases.
• 6:23
  And Adelaide, probably the two. And Adelaide just had another bump a month. But they're closing in their affordability ceiling. And we'll go through what that means in the runway of each market in a moment. But they're the two that I'm probably more concerned about. I think Perth wouldn't have even felt the bump at all. And it's continued to just perform at a rate that probably defies a lot of people. And the same too with Brisbane and a lot of the Queensland market.
• 6:45
  Yeah, I mean the data set will be up on the screen for those viewing this podcast right now, but Perth, the leader, 2%. And looking at the weekly data we track in terms of listings versus sales, we're still converting over 35% at record low listings. So 35% of the market is selling on a weekly basis, which anything over 20% is when you're going to see that significant growth per month, typically more than 1%. So leading the way at 2%. Big one was Brisbane, the market that just doesn't slow down. And it hasn't for a decade.
• 7:14
  1.6 and actually outpinned Darwin who was the biggest performer in the last 12 months. And as you said there, Adelaide over a percent as well. So strong performance from those that probably ended 2025 in a strong performance. But yeah, I think Brisbane's a fascinating one. We knew Perth wasn't slowing down due to the listings that we were seeing, the sales that we were seeing. But this Brisbane market, although, you know, peaking over its ceiling for affordability, still not showing any signs of slowing down.
• 7:41
  What's interesting, Rhys, though, and everyone's going to say, well, is this the new norm where we see 2% growth per month across Australia? No, it's not. I understand you are going to see ceiling caps for that first-time buyers grant, and we're closing in on that quicker than I think anyone anticipated, particularly the Albanese government who brought forward that initiative
• 7:58
  So fantastic, well done. You brought it forward 12 months. Inflation goes up, you increase interest rates. So we're going to hit that affordability ceiling first-home buyers. So I don't expect we're going to see the same level of growth for the entire year. But certainly for this first quarter, it's going to be a very buoyant market at that lower end. But once we do hit that first-home buyer ceiling across the country, it sits between $800,000 and $950,000. You will start to see a bit more of a balanced increase in median house prices, probably circa 1%.
• 8:26
  Yeah. Some of the graphs you're going to see now is our affordability index. We've spoken about this in length over the podcast over the last 10 months. So just for those who are just tuning in, it is the medium average household income consumed by the medium household mortgage repayment.
• 8:42
  Now, some markets are at their historic peaks and you hear us talking about either at their historic peaks or for Perth, for example, we talk about there's 10% left to go in the market. What does that actually mean? I think that's one of the things that, you know, we say these figures, but what we've actually now created is a affordability runway index where we can actually clearly say, okay, what does that mean in terms of when's it going to cap out? Because that's what everyone wants to know. 10% left in the market, what does that mean? 10% growth in terms of property prices. So, yeah.
• 9:10
  The graph we've got up at the moment is where we see houses and units. As you can see there, Sydney's starting to now stagnate and go backwards from an affordability ceiling. It's already hit its peak at the back end of last year. We're now seeing, you know, from a value perspective, the markets have the most runway to go. Perth, Melbourne and Darwin, no surprise.
• 9:30
  Yeah, and that's what it is, and that's for people we talk about it, at least visually you can see, it's how much runway's in the market until it hits its historical affordability ceiling. It's not to say I can't push past this, because we've seen Sydney do that in recent years. We've seen markets across Australia. And what you find is because interest rates are rising, the runway will shrink.
• 9:50
  shrink because what affects the affordability index? Median house prices, median household income and interest rates. They're really the three inputs. So incomes aren't going to go up as quick as prices are and interest rates, well, they're quite a volatile market. So we will expect this year with another rate rise that markets will become more unaffordable because of interest rates. Therefore, the runway in these markets in terms of till they hit their affordability ceiling will reduce. That's a great point. So
• 10:16
  The graph that you'll be seeing right now on our investment report, so hit the QR code, hit the link to download the reports and get access to this, this is on a 5.79% interest rate. Now, speaking with mortgage broker relationships over the last couple of days, that's now starting to push closer to 6%. With any rate rises, that will then shrink the maximum sort of cap out from a ceiling perspective. So just to run off an example, Perth,
• 10:43
  on the current interest rate, should tap out at about 1.25, 1.3 mil as a medium house high price. But if you increase that rate, it then starts to drop down to lower 1.2s, 1.15. So it will be interesting to see. Affordability is already slowing down. Any more rate increases, it's just going to start to bring a halt to most of those markets.
• 11:02
  But I get asked, Rhys, a lot, what does this mean? Like, what does this mean when we hit the ceiling? If Perth was hit to the ceiling, does that mean the market just stops overnight? No, it doesn't. So generally speaking, over the last 40 years, when demand outweighs supply and there's affordability in the market, perfect example of that would be Perth or Melbourne right now, prices will run and have always ran.
• 11:22
  When demand and supply are balanced and there's affordability in the market, they may continue to run, but it's not a definite. If we see that flip where demand and supply start to balance out and there's no affordability in the market, well, that's when we might see prices stagnate and potentially fall. So what does that mean for the likes of Brisbane and Perth in the short term?
• 11:45
  Well, there's no quick fix for the housing shortage, right? So why demand significantly outweigh supply, which I think will for 2026, those markets are still going to run even if they push past their historical affordability ceilings. But it will get to the point, particularly that first-time buyer cap, where they actually just can't afford anymore. And the market, people can't afford to make the repayments at the higher rates. The banks won't give them the money. And now we're starting to see some restrictions around trust lending and...
• 12:12
  the banks are starting to clamp down a little bit on how they give out debt. I think it will be harder to get debt at the back end of the year. You've only got to look at January's performance where every market, including regional, so regional combined went up a percent last month. That's the wave of the buyers, Agent Rhys. That's the affordable markets they like to play in.
• 12:28
  Every market went up, though. And one of the big things we've launched at Folio in the last couple of months is our investment sentiment index. So we're looking at current investors and what is the sentiment in the market. I think it's a good – we always talk about supply and demand. Sentiment drives markets. Correct. And the big thing we notice from our investors is only 10%, and this is a large pool we surveyed,
• 12:54
  Only 10% weren't confident in the market right now. So 90% are confident investing in property in Australia, not a specific state, capital city, regional, just in general. So it's pretty powerful data. It is. And I like to think we're pretty conservative on this podcast. We're not trying to push markets. We're just giving our honest opinion, right? So to see that the marketplace is 90% positive in terms of where the markets are going this year gives you an idea of likely where the markets will go because sentiment typically tells a bit of a story.
• 13:22
  Yep. And only 5% would be in a position where they'd want to sell. So 52% wanted to buy, the rest wanted to hold, and only 5% were wanting to sell. And you wonder why we're in an undersupplied market, Rhys. And this is the bottleneck. No one is selling. Everyone wants to buy. That is the definition of supply and demand. Yep.
• 13:40
  And then let's just touch on the property cycle. So we've spoken about this on previous updates throughout the podcast, but it's really to understand where each capital city is in its cycle and where it is in a position perspective. We've got an updated graph here. I think the key ones to kind of hold out is Adelaide now starting to get to its peak.
• 14:01
  Similar commentary to what you've been saying over the last couple of episodes. Brisbane's starting to push close behind. Perth's starting to go up more on that growth cycle as well. But actually now looking at Darwin as an opportunity and Melbourne and Canberra sort of now starting to enter down the bottom of the cycle and starting to have those green shoots.
• 14:18
  Yeah, look, history tells us that markets run at different times in the cycle and often it's counter-sequel. And no, not all markets in Australia will run at the same time. And I think we've started to see shift in migration. We've started to see shift in investor sentiment in various markets. To say there's green shoots around, I always put the concerns around Darwin longer term, but certainly short term, I think it'll do quite well. But...
• 14:44
  You're right, Canberra, it's an interesting market. It's the highest incomes in Australia. So people don't realise that. Western Australia's got the second highest incomes in Australia, only second to the ACT. So government jobs pay well. There's always going to be strong migration there. So it's had a really stagnant five-year period. And now it's starting to represent value. And Melbourne, we know we talk about a lot, sort of coming out of the troughs and the despair of COVID has shown more than green shoots over the last 12 months.
• 15:11
  And then just one of the last bits on the sentiment is the biggest concern the investors have when it comes to property investing in 2026 is cash flow. And I think that's probably down to a lot of these unicorn assets or these 6% yields that were achievable with some of these other markets over the last couple of years starting to sort of reel away and investors still wanting that 6% yield that it's just, you know, from a capital growth perspective isn't achievable.
• 15:36
  Yeah, and that's what's probably surged people or pushed people into regional markets where you do get the higher yielding assets, but it comes with risk, right? Typically, when you get higher yields, higher cash flow comes with higher risk. Go to a mining town, for instance, and I can get your 10% returns tomorrow, but you could also lose 50% market value in that property within a short period of time.
• 15:56
  So I think for investors that are looking to achieve yield, there's a strategic way to do it where you can still get allocation to blue chip markets in localities that we feel strongly about that will give you similar capital growth upside but you're getting higher rental returns that regardless, you look at your downside risk, you can still sell that asset to an own occupier in a strong metropolitan area. You're just not looking at a...
• 16:23
  an old established house on 700 square meters, you may be looking at assets with 60% land evaluation ratios rather than 90%. And that's where it's important that our listeners educate themselves on that and do the numbers before going into the marketplace. Because what I find is people underestimate the cash flow required to hold property.
• 16:41
  and they go out there and they find a fantastic asset. But if it's too negatively geared and the cash burns too significant, that sort of hamstrings them for another investment or they get uncomfortable and prematurely have to sell it. So yeah, I understand 2026 cashflow is going to get harder because the cost of money is increasing. To offset that, we need to be strategic in what you buy and how you can create value and increase cashflow. There's other
• 17:06
  about that before through renovating, secondary dwellings or room sharing, all these various ways that you can increase your cash flow to ensure you don't have to sell the property prematurely or it gives you the capacity to buy another. Awesome.
• 17:21
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• 17:50
  big month or big start to 2026 in terms of the property markets. And it will be interesting to see where that capital gains goes into next month. For those that haven't downloaded the report, click the link below. Click the QR code if you're watching on TV. These reports will be monthly and, like Ocon said, come from our Chief Economist.
• 18:09
  We'd love to hear more about the reports or if there's data in there that we no doubt house. We house a lot of data. We don't want to put a 100-page investment report to the listeners because not everyone's as excited about data as I am. But if there's other things you want to look at, if it's population growth metrics, we've got a number of different various metrics in that investment report. But I'd love to hear what you want to see more of. Leave a comment. Leave a comment for what you want to see in our monthly research report. Awesome. You've been listening to Folio Property Podcast.
• 18:44
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