CANBERRA, AUSTRALIA / RankWire.AI / – Australia’s property tax overhaul has intensified attention on rental returns after a bank analysis outlined a 25% to 30% rent scenario for Sydney and Melbourne. The figure applies only to a calculation that holds dwelling prices unchanged. It is not a forecast for rents. National Australia Bank said the calculation assumed gross rental yields rose from about 3.5% to 4.5%. The bank later clarified that rental yields are not part of its forecast set.
The calculation has drawn attention because federal tax rules for residential property investors will change from July 1, 2027. Negative gearing will then be limited to new builds for affected property purchases. Properties held before 7:30 p.m. AEST on May 12, 2026 retain their existing treatment. Investors buying established homes after that date cannot offset residential losses against wages. They can still offset losses against residential property income and carry excess losses forward.
Capital gains tax rules will also change from July 1, 2027. The 50% discount will give way to inflation-based cost indexation and a 30% minimum tax on real gains. Gains accrued before the start date retain transitional treatment. Buyers of new homes can choose between the existing 50% discount and the new system. Parliament passed the tax legislation in June, and the measure now appears on the federal register as Act No. 49 of 2026.
Bank calculation differs from official rent estimate
The Australian Treasury has produced a much smaller estimate for the direct rental effect of the tax changes. Its modelling put the increase at about A$2 a week at the median rent. Officials linked that estimate partly to grandfathering, which leaves existing investment holdings under current negative gearing arrangements. The modelling also projected housing prices would grow about 2% less than otherwise. That figure describes a change in price growth, rather than a forecast for a nationwide price decline.
Separate housing research from the bank shows why rental conditions remain closely watched. Its August analysis described rental markets as historically tight, with advertised rent growth still elevated. The report said the tax changes increase required rental yields for investors seeking comparable after-tax returns on leveraged property. It also recorded lower housing turnover and weaker investor demand. A property survey conducted after the federal budget found rental growth expectations at 3.9% over the next year, up from 3.1% previously.
Rental market stays tight as housing prices soften
The bank’s August housing monitor showed Sydney and Melbourne dwelling prices each stood 5% below their recent peaks. July declines reached 1.4% in Sydney and 1.2% in Melbourne from the previous month. The same research showed price weakness had broadened to Perth, Brisbane and Adelaide. Rental vacancy rates remained near record lows at about 1.7% in recent monthly data. Advertised rent growth was running near 5.8% on a six-month annualised basis in July.
The two rent figures measure different things and should not be treated as competing forecasts. The 25% to 30% figure is a yield calculation based on unchanged dwelling prices, not a rental forecast. The roughly A$2 weekly figure comes from government modelling of the direct tax impact. Both sit alongside current market data showing tight vacancies and elevated advertised rent growth. The tax changes start in July 2027, while grandfathering protects properties held before the May 12 budget announcement.