The Federal Budget includes a range of housing measures designed to improve access to home ownership, with the government arguing that changes to negative gearing and capital gains tax concessions will help level the playing field for first home buyers.
According to Treasury estimates, the reforms could support an additional 75,000 homeowners over the next decade. The question many aspiring first home buyers are asking is whether these Federal Budget housing measures will make a meaningful difference to housing affordability in Australia, or whether the impact will be more modest than the headlines suggest.
The centrepiece of the Federal Budget’s housing reforms is the decision to limit negative gearing on residential property to new builds from 1 July 2027, while also changing capital gains tax (CGT) concessions for future investments. Importantly, existing property investments are protected under transitional arrangements, meaning anyone who owned an investment property before 7:30pm AEST on 12 May 2026 will not be affected by the new rules. These protections apply only to investments already held at that date.
The federal government’s logic is relatively straightforward. If investors receive fewer tax advantages when purchasing established properties, some may choose not to compete in that segment of the market. Reduced investor activity could create more opportunities for first home buyers seeking established homes, thus making buying your first home more achievable.
The reforms are also intended to direct more investment into newly built housing, increasing supply over time. Alongside the tax changes, the Budget includes a new $2 billion Local Infrastructure Fund expected to support up to 65,000 homes over the next decade through investment in roads, water, power and other essential infrastructure.
Several factors suggest the benefits may be more modest than many first home buyers expect. Firstly, existing investors are protected under the transitional arrangements, meaning many may simply hold their current properties rather than sell – which could actually constrain supply in the established market despite lower investor demand going forward.
Secondly, demand may also shift rather than disappear. Investors still retain access to favourable tax treatment when purchasing new builds, which could increase competition in that segment and place upward pressure on prices.
Market uncertainty is already influencing behaviour. Industry commentators have reported softer listings and lower clearance rates as both buyers and sellers wait for the reforms to be legislated and implemented.
While some analysts expect the reforms to place downward pressure on property prices, history suggests housing downturns can vary significantly in both depth and duration.
According to Cotality data published by the Australian Financial Review (AFR), previous downturns across the combined capital cities have lasted anywhere from a few months to almost two years before stabilising.
This uncertainty is one reason many property experts continue to focus on financial readiness rather than market timing.
There are also two structural challenges that the reforms do not address. The first is the deposit hurdle – even if price growth slows, saving a sufficient deposit while managing rising living costs remains difficult for many households. The second is housing supply. Australia continues to face a significant housing shortage, meaning tax changes alone are unlikely to resolve housing affordability in Australia. Increased construction, faster planning approvals and infrastructure investment will likely play a much larger role over the long term.
Rather than attempting to predict exactly how the market will respond, preparation remains one of the most effective ways to improve buying opportunities.
According to the Federal Budget, more than 250,000 Australians have achieved home ownership through the 5% Deposit Scheme since May 2022. The First Home Buyer Guarantee, stamp duty concessions and other first home buyer assistance initiatives may also reduce upfront costs depending on individual circumstances.
Financial readiness is equally important. Buyers who understand their borrowing capacity, have pre-approval in place and maintain a strong savings record are better positioned to act when the right opportunity arises. Keeping a close eye on Reserve Bank of Australia rate decisions is also worth doing – movements in the cash rate directly affect borrowing capacity and the cost of a first home buyer home loan.
Rentvesting may also be worth considering. Purchasing an investment property in an affordable location while continuing to rent in a preferred suburb can provide a pathway into the market without requiring buyers to compromise on lifestyle or employment. The continued tax advantages available to investors purchasing new builds may make this approach particularly relevant under the new rules and could form part of a broader first home buyer property strategy.
The Federal Budget reforms may create some tailwinds for first home buyers, but they are unlikely to remove the biggest challenges overnight. The right strategy will depend on your individual financial position, goals and timeline.
Understanding how the Federal Budget changes interact with lender policies, government schemes and your borrowing capacity can be challenging. Shore Financial helps first home buyers assess their options and build a strategy that reflects their long-term goals.
Thinking about buying your first home? Speak to the expert team at Shore Financial. We’ll help you understand which first home buyer schemes you may be eligible for, assess your borrowing power and develop a clear strategy to enter the market with confidence. Call us on 1300 416 700, email info@shorefinancial.com.au or fill in this online form.
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