Federal Property Tax Changes May Reduce Housing Supply, Boost Rents

New economic modelling has raised concerns that recent federal property tax reforms could reduce new housing construction and add further pressure to rents over the coming years.

The analysis, prepared by Qaive and Tulipwood Economics for the Housing Industry Association, Master Builders Australia, the Property Council of Australia and the Real Estate Institute of Australia, estimates the combined housing package could result in around 10,700 fewer new dwelling starts between 2026–27 and 2029–30.

The modelling also forecasts rents could be around $10 per week higher by 2029–30 than they otherwise would have been, on top of normal inflation and market-driven increases.

The findings are based on the combined effects of changes to negative gearing and capital gains tax arrangements, restrictions on some SMSF borrowing for residential property, and the Government’s $2 billion Housing Support Program.

For Melbourne’s western growth corridor, any reduction in future housing construction would be significant. The region depends heavily on new estates, townhouses, apartments and house-and-land developments to accommodate ongoing population growth.

If fewer projects proceed, the supply of new homes could tighten, particularly in suburbs where demand continues to rise faster than construction.

For renters, reduced supply could mean greater competition for available properties. If vacancy remains tight, landlords may have greater pricing power, adding further pressure to household budgets.

For existing property owners, stronger demand for a limited number of homes could support property values and rental income over time, although higher interest rates and holding costs remain important considerations.

Developers could also face a more difficult environment if investor demand weakens. Pre-sales are often important for securing project finance, so fewer investors may affect whether some projects move from planning into construction.

However, the modelling is contested. Treasury’s own estimates are more optimistic, arguing that the wider housing package could deliver a net increase of around 30,000 homes over the next decade, with rental impacts closer to $2 per week for a household paying the current median rent.

This difference highlights how sensitive housing forecasts are to assumptions about investor behaviour, construction activity and the effectiveness of government supply programs.

For buyers and investors in Melbourne’s west, the most important issue is therefore not the modelling alone, but whether new housing supply continues to keep pace with population and rental demand.

Overall, the latest analysis adds to concerns that policy changes designed to reshape property investment may also affect the volume of new homes built. For Melbourne’s western growth corridor, maintaining a strong development pipeline will remain critical to keeping housing choice and rental affordability under control.