Q. What impact do you think the investor tax reforms will have on borrowers?

A reassessment of investment plans

The market will flatten out, especially for investment-grade properties due to borrowing power limitations. A lot of investors will have to pivot and lower their expectations on properties. Because of these factors, I think both new and old-school investors will take a breather to reassess their next investment plans. I think everyone will take time to readjust to what is happening.

We recently reran borrowing power without negative gearing for clients looking to buy after 12 May 2026, and to no surprise, it dropped by around 25–30 per cent. For example, we had a client on a $100,000 salary, living at home with family, with HECS the only debt, and a proposed rental income of $500 per week. Their pre-budget borrowing power was $675,000. Post-budget, it fell to $490,000.

The process will take a little time on our end to ensure we do sufficient checks on exactly when the property was purchased before calculating and submitting to the lender.

Investors will take a double hit

Investors are potentially facing a double hit: higher assessment rates from lenders and reduced servicing benefits from negative gearing changes.

We’ve already seen a lot of investors reassess their plans over the last couple of years because of what rising rates have done to their numbers. If you then layer on a 20 per cent hit to borrowing capacity because negative gearing is no longer part of the servicing equation, fewer investors can qualify for loans, and you could eventually see less rental stock entering the market.

For many Australians, property investment has historically been one of the main pathways to building long-term wealth outside of superannuation. If borrowing becomes significantly harder for future investors, there’s a broader conversation around what that means for long-term financial security and passive income generation.

A greater premium on quality owner-occupier assets

Nothing has been made law yet, and we are still around two years away from the next election, but the direction is clear enough that every property strategy now needs to be reassessed.

The biggest changes we see are: a greater premium on quality owner-occupier assets; more pressure on investor-driven stock and investor-heavy markets; a rise in first home buyer activity; a major rethink of rentvesting strategies; more focus on upgrading, renovating, and building wealth through the family home; a bigger role for share investing, dollar-cost averaging and debt recycling; and a possible bank refinance war, as lenders look to keep growing loan books while investment lending slows.

Banks have also materially changed borrowing capacity, which means many old pre-approvals, upgrade plans, and investment strategies may no longer make sense.

A shift to new builds

Every broker should really be checking their clients’ pre-approvals – a lot of them are worth nothing now. I submitted a pre-approval for $1.7 million thinking everything was fine, but once Macquarie factored in no negative gearing, it came back closer to $1.26 million. That’s a huge difference.

If investors still want to keep buying residential property, they’ll probably shift towards new builds because that’s where the incentives remain. There’ll still be buyers looking at off-the-plan apartments or brand-new stand-alone homes, even if historically, those properties haven’t always grown as quickly.

I’ve already had a couple of clients start considering SMSFs, so I think that space is going to boom. There are going to be a lot of new investment vehicles and structures being created as people look for ways around these changes.

Commercial property is completely exempt from these changes, so naturally, that’s going to attract more attention as well.