Will Higher Taxes in Australia Push Rents Even Higher?
Housing is already heavily taxed. Industry data shows nearly half the cost of a new house in our capital cities goes to government taxes, fees and charges. Buyer’s agents note that this heavy tax burden squeezes the market’s ability to deliver new homes. As HIA’s managing director said: “If you tax something more, you will get less of it”. Federal discussion of cutting the 50% CGT discount for investors has only added to concerns, with many in the sector warning that affordability could suffer.
Impact on investors and renters. Investors currently buy a large share of new homes. Last year, about 40% of new houses were financed by investors, who also provide rental stock. HIA warns that if taxes on investors rise, some may pull back – “every investor that leaves the market represents one less rental property”. Australia’s rental market is already very tight (vacancy around 1.7%), and rental listings have fallen sharply. This shortage is pushing rents up – national rents are growing over 5% per year – meaning tenants face higher costs as investor participation slows.
Supply Shortfall in New Homes
We are not on track to meet the 1.2 million home target. Current forecasts project only about 938,000 new homes by 2029 – roughly 262,000 below the goal. In the first year, some 60,000 fewer homes were built than planned. Industry leaders point out that high costs and a shortage of skilled labour already make many projects unviable. In short, HIA calls housing “now a macroeconomic problem”, noting that a shortage of homes is driving inflation and keeping prices and rents high.
What does this mean for Buyers?
In a tight market, competition is fierce and price growth can stay firm long-term. Constrained supply can support capital gains even when costs rise. Cutting investor tax breaks would have only a modest effect – one study estimates halving the CGT discount might reduce new builds by only ~10,000 homes over five years. That’s small compared to the gap, but in a market this tight every home counts. For you as a buyer or investor, a clear strategy is vital. Focus on suburbs with strong rental demand and fundamentals (good schools, amenities, jobs) – even in a high-price market, solid basics win over hype. Keep an eye on policy news but remember that low supply tends to keep prices buoyant. In practice, being prepared (with finance sorted out) and moving quickly on good opportunities can make a big difference.Ready to make your move? For tailored advice or to discuss your buying strategy, contact Investmate today. Feel free to call us at +61 421 942 049 or book a free consultation. Investmate is here to guide you and help secure the right property in this market. Follow us on Instagram and LinkedIn for more insights.
