CBA has detected a sharp post-budget shift in residential investor lending, but not the commercial-property surge it expected.
The Commonwealth Bank of Australia (CBA) has said investors are not pivoting decisively into commercial property after the federal budget changed the tax treatment of residential investment, even as sales activity and offshore interest in commercial assets continue to rise.
Speaking at CAFBA’s commercial property and development finance summit in Sydney on Tuesday, (22 September), which was attended by The Adviser, Kevin Stanley, CBA’s director of commercial property, said more than $22 billion in debt had been flowing into existing residential property every quarter for around 18 months before the budget measures were announced.
“One of the biggest questions that has come through is where will investors go if they're not going into residential? and we noticed that pre the tax changes this year that there was over $22 billion of debt going into the existing residential markets every quarter for about 18 months before those tax month changes were made,” Stanley revealed.
“Then all of a sudden, it stopped very quickly, and we do ask the question: Where will investors go?”
The May federal budget proposed to limit negative gearing for residential property to newly built dwellings from 1 July 2027, while quarantining losses on affected established-property investments.
It also proposed replacing the 50 per cent capital gains tax discount with an indexed cost-base approach and a 30 per cent minimum tax rate on real capital gains. Existing investment properties would also be grandfathered.
Commercial market holds up yet investors remain cautious
CBA had initially expected commercial real estate to be a major beneficiary as investors reconsidered established residential property, however, Stanley said the anticipated reallocation had not emerged.
“We initially thought that commercial property was probably going to eventually be the big winner in terms of where that capital goes but we are noticing at the moment that there doesn't appear to be a rush into commercial property,” he said.
“It may well be that investors are still not sure what's going on anyway in the world, and you could understand that, so they may well be just waiting for the for the time being.”
That caution comes despite a stronger-than-expected commercial property market.
“The market that hasn't slowed down, in fact, it's gone the other way, is commercial property sales activity,” Stanley revealed.
“The first part of 2026 was full of surprises, and one of them was three increases in interest rates, and we thought that might be enough to slow down interest in commercial property and in fact, it's gone the other way.”
He said commercial-property trading activity was running 6 per cent above its 2025 level, while values had continued to increase despite market challenges.
“Despite all of the challenges that have occurred earlier this year, commercial property values have kept increasing, and this stands in contrast to the residential sector at the moment,” Stanley said.
“I think it’s one of the reasons why eventually the capital flows from residential into commercial.”
Offshore buyers back Australia
Stanley also said institutional and offshore capital was helping underpin commercial-property activity.
“I think it tells you that Australia is still viewed internationally very favourably,” he said.
“That we are a very stable, very transparent market with a lot of growth coming through for the longer term and so we've seen some quite large transactions coming from Singapore and North America, in particular.”
Stanley added that NSW was attracting an outsized proportion of national activity, according to CBA’s assessment.
“Commercial property at the moment is trading 6 per cent up on where it was in 2025, at the moment, trading activity in New South Wales accounts for 42 per cent of the national total,” he said.
“Now it should be accounting for about 30 per cent so it's very much over-performing.”
Stanley said Queensland was also gaining investor attention, while South Australia had overtaken Western Australia in CBA’s state ranking, which the bank partly attributes to South Australia’s lack of stamp duty on commercial-property transactions.
Industrial lead narrows
Stanley said industrial property remained the dominant traded commercial asset class after six years at the top, yet added that capital was beginning to look more closely at retail.
“Capital has mainly been flowing into New South Wales and I think the key message is that industrial property is still the dominant traded asset class, but its dominance is starting to reduce a little now,” he said.
“We think the growth potential in the rental side of industrial is slowing, and so it's starting to shift capital, particularly into retail.”
[Related: UDIA warns SMSF and budget changes threaten supply]
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