Federal changes to negative gearing and capital gains tax are reshaping investment strategies, with Australia’s peak body for professional property investment advisers warning that some buyers are being drawn towards higher-yielding assets at the expense of long-term wealth creation.
The Property Investment Professionals of Australia (PIPA) said the Albanese government’s reforms, due to take effect from 1 July 2027, were already influencing investor behaviour as buyers and advisers reassessed how residential property investments stack up under the new tax settings.
From that date, negative gearing concessions will be restricted to newly built properties. Existing investment properties purchased before the changes will retain their tax treatment under grandfathering provisions, while investors buying established homes after 1 July 2027 will no longer be able to offset rental losses against other income.
PIPA chair Cate Bakos said the combination of the negative gearing changes and capital gains tax reforms had shifted attention towards cash flow, creating the risk that investors overlook the factors that have traditionally driven long-term returns.
“Positive cash flow may appear more valuable now that first-time investors no longer have access to negative gearing tax offsets unless they purchase brand-new property,” Ms Bakos said. “It helps service debt, provides resilience against rising interest rates, and offers liquidity. But cash flow alone does not build wealth, because capital growth remains the cornerstone of successful property investment over the long-term.”
Ms Bakos said the changing market was prompting some advisers to recommend asset classes outside their area of expertise and urged investors to scrutinise the advice they receive.
he changing market was prompting some advisers to recommend asset classes outside their area of expertise and urged investors to scrutinise the advice they receive.
“Consumers must ask their advisers for their experience in recommending regional or commercial assets. Do they understand the growth fundamentals of these markets, or are they simply chasing yield?”
The warning reflects concerns that have surfaced during previous periods of tax and market change, when investors were steered towards high-yield regional properties and smaller apartments offering attractive rental returns but weaker prospects for capital growth. Many of those purchases delivered strong income but limited gains in property values over time.
PIPA also highlighted lending and resale risks associated with some property types. Many lenders apply minimum floor area requirements, often between 40 and 50 square metres, which can limit refinancing options. Company title properties and some leasehold arrangements can also require larger deposits, reducing the pool of future buyers.
Regional markets present another challenge. While some areas close to major cities or with strong lifestyle demand have recorded sustained price growth, others remain heavily dependent on local industries, exposing investors to greater vacancy risk and more modest capital appreciation.
The industry’s emphasis on capital growth, however, comes as investors face a markedly different borrowing environment from the one that prevailed for much of the past decade.
With the Reserve Bank’s cash rate at 4.35 per cent following three increases during 2026, holding a negatively geared property has become substantially more expensive. Investors carrying large mortgages face much higher interest costs than they did when interest rates were near record lows, increasing the importance of rental income in meeting ongoing expenses.
The reforms also create an unusual tension within the government’s housing strategy. By limiting negative gearing to new dwellings, the changes are expected to steer more investors towards off-the-plan apartments and other new developments, asset classes that can carry their own risks, including compact floor plans, construction delays and uncertainty over values between contract and settlement.
For investors weighing purchases ahead of the 2027 changes, the debate is increasingly centred on balancing cash flow with long-term growth rather than choosing one over the other.
“The Budget may have changed the rules, but it hasn’t changed the principles,” Ms Bakos said. “Cash flow is important for sustainability, but capital growth is what compounds returns and builds wealth over time.”
Support Independent Community Journalism
Dear Reader,The Indian Sun exists for one reason: to tell stories that might otherwise go unheard.
We report on local councils, state politics, small businesses and cultural festivals. We focus on the Indian diaspora and the wider multicultural community with care, balance and accountability. We publish in print and online, send regular newsletters and produce video content. We also run media training programs to help community organisations share their own stories.
We operate independently.
Community journalism does not have the backing of large media corporations. Advertising revenue fluctuates. Platform algorithms change. Costs continue to rise. Yet the need for credible, grounded reporting in a multicultural Australia has never been greater.
When you support The Indian Sun, you support:
• Independent reporting on issues affecting migrant communities
• Coverage of local and state decisions that shape daily life
• A platform for small businesses and community groups
• Media training that builds skills within the community
• Journalism accountable to readers
We cannot cover everything, but we work to cover what matters.
If you value thoughtful reporting that reflects Australia’s diversity, we invite you to contribute. Every donation helps us maintain the quality and consistency of our work.
Please consider making a contribution today.
Thank you for your support.
The Indian Sun Team
