Investor activity in Southeast Queensland’s property market has fallen sharply in the months ahead of tonight’s federal budget, with internal data from a major real estate firm recording a 21 per cent drop in investor participation since the start of the year.
New figures from Image Property, drawn from more than 5,000 offers received between July 2025 and April 2026, show investors accounted for 28 per cent of all offers on the agency’s listings in the second half of 2025. Since January, that share has dropped to 22 per cent.
Image Property Managing Director Joel Davis attributed the decline directly to mounting speculation about changes to negative gearing and the capital gains tax discount, both expected to feature in Treasurer Jim Chalmers’ budget address tonight.
“The moment the government began signalling possible cuts to negative gearing or the CGT discount, investor confidence took a hit across Southeast Queensland,” Mr Davis said. “We’re seeing investors pause, hesitate or withdraw entirely and that hesitation is already flowing through to reduced rental supply. This is not sentiment or theory – it’s real-time behavioural change across thousands of transactions.”
Reports ahead of the budget suggest negative gearing may be restricted to newly built properties, with investors who acquire assets before budget night grandfathered under existing rules. The 50 per cent capital gains tax discount, which currently applies to assets held for more than 12 months, is also widely expected to be scaled back. Any changes are understood to apply to assets acquired from budget night, with reforms taking effect from 1 July 2027.
“We’re seeing investors pause, hesitate or withdraw entirely and that hesitation is already flowing through to reduced rental supply. This is not sentiment or theory – it’s real-time behavioural change across thousands of transactions”
The retreat comes as rental vacancy rates across Southeast Queensland sit well below healthy levels. Greater Brisbane’s vacancy rate stands at around 0.9 per cent, with both the Gold Coast and Sunshine Coast at one per cent. A balanced market is generally considered to fall between 2.6 and 3.5 per cent.
Mr Davis said conditions were already making it harder for young people to find a rental property, let alone save for a first home.
“Reduced investor activity will only deepen the crisis if the mooted tax reforms become a reality next week,” he said. “If investors continue to step back, vacancy rates will tighten even further and rents will rise. Young people will be squeezed hardest and not just in the rental market, but in their ability to save for a first home.”
He questioned where replacement rental stock would come from if investors left the market. “The government has consistently struggled to deliver new rental supply, so if investors desert the market, where exactly is the new stock going to come from?”
Mr Davis said the Federal Government should be looking to incentivise new supply rather than deter it. “Maintaining the CGT discount and preserving negative gearing – at least for investors who buy or build new stock – would directly support the creation of additional rental homes,” he said. “If the goal is more supply, policy should reward the people actually providing it.”
The concerns reflect broader unease in the property sector. Real estate agent and commentator Tom Panos said on social media that Australia could be “less than 48 hours away from one of the biggest property tax changes in decades.”
“Many Australians feel they voted believing these changes were off the table, only to now face a possible last-minute rewrite of the rules,” Mr Panos wrote. “The question isn’t just what changes are coming. The question is: why weren’t people told before the election?”
“Many Australians feel they voted believing these changes were off the table, only to now face a possible last-minute rewrite of the rules”
Mr Panos added that the latest intelligence suggested investors would retain the ability to negatively gear brand-new properties, “with a view to encouraging new developments to be built.”
Not all observers are alarmed by the direction of reform. Libertarian commentator Dr Richard Hirschson said removing tax incentives for investment property was “correct policy,” though he cautioned the transition would be difficult.
“Bubbles don’t deflate, they pop,” Dr Hirschson said. “ALP will cop the blame for popping the Australian property bubble (although with Sydney prices at 13.9 times income, rising interest rates will do that anyways). Labor will also be blamed for the compensatory rental price spikes as well as the drop in new builds. Throw in an economic crisis from energy scarcity and you have the perfect storm.”
The budget arrives as the Reserve Bank flags stagflation risks, with inflation potentially climbing above 4.8 per cent amid energy price pressures linked to the Middle East conflict. Treasurer Chalmers has downplayed expectations of an immediate revenue windfall from the proposed changes, citing transition rules, and has indicated the government will push back against what it regards as unnecessary alarm.
Economists remain divided. Some argue the reforms represent a long-overdue rebalancing of a housing market where Sydney prices now sit at roughly 13.9 times median income. Others warn that reducing investor incentives in a market already short on supply, and under pressure from immigration-driven demand and construction constraints, risks making conditions worse before they get better.
The exact shape of tonight’s announcement will determine which argument carries more weight.
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