Federal Budget: An estate agent's view on what changes mean for local property market

Tuesday night’s Federal Budget delivered some of the most significant changes to
property taxation in recent years, with reforms to negative gearing and capital
gains tax taking centre stage. For many property owners and investors, the outcome is both surprising and disappointing — particularly given commitments made just 12 months ago not to alter these settings.

Rather than modest adjustments, the changes represent a substantial shift in policy direction. They have been positioned as a response to generational inequality and aimed at improving access for first home buyers. However, there is growing debate as to whether these measures will achieve their intended outcome.

First home buyers already benefit from a range of government incentives and
schemes, which have played a role in supporting demand — particularly in the lower end of the market. In many cases, this has contributed to price growth in entry-level properties while, at the same time, investor participation has declined.
A number of economists have questioned whether further discouraging investors will improve affordability. The concern is that reducing investor activity may, over time, limit rental supply—placing additional pressure on rents rather than easing purchase prices.

From a taxation perspective, Australia’s capital gains tax settings are now among the highest globally, which may further reduce the appeal of property investment as a long-term wealth strategy. For many everyday Australians, property has traditionally been a pathway to financial security and reduced reliance on government support in retirement.

Locally, the impact may be more muted than headlines suggest. Investor demand
has already softened in recent years, while owner-occupiers and first home buyers
have been the primary drivers of price growth. As a result, these changes may
reinforce existing trends rather than dramatically shift market direction in the short term.

What is clear, however, is that confidence plays a critical role in any property market.

Sudden policy changes – particularly those that contradict recent commitments – can create uncertainty and hesitation among buyers and investors alike.
In the weeks and months ahead, the market will digest these changes. As always,
local conditions, supply and demand, and buyer confidence will continue to shape
outcomes here in our community.

This partner content was provided by Pepper Real Estate Agency HQ director Ian Pepper, a regular advertiser who supports local independent news in the Illawarra Flame.

Ian Pepper has had a long and distinguished career as a finance and real estate professional. Originally trained as a Chartered Accountant in 1995, Ian worked in Sydney and London. He has an MBA from Macquarie Graduate School of Management and now sells real estate with Pepper Real Estate Agency HQ. Ian also volunteers with local community groups including school P&Cs, sporting clubs and business chambers. Follow Ian on Facebook and Instagram