Negative Gearing Changes in Australia: Why the Street Matters

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The negative gearing changes in Australia have altered the logic behind buying established investment property. Ripehouse Advisory data shows prices falling in many Melbourne suburbs while rents rise — creating a more selective market where the asset, yield and individual street matter more than the tax benefit.

What the negative gearing changes in Australia mean for investors

Under the previous rules, an investor earning $50,000 in rent with $60,000 in loan interest had a $10,000 loss. For someone earning more than $190,000 and paying 47 cents in tax on each additional dollar, that loss could produce a tax benefit of about $4,700.

That tax treatment helped make the traditional “push property” strategy more affordable. High-income earners could direct employment income into an asset that might grow in value, while the tax system absorbed part of the holding loss.

Around 2.2 million Australians own an investment property, and around half are negatively geared. This was not a strategy limited to a small group of investors. It became a national property-buying playbook, particularly for established houses.

The changes now divide investment property into three broad buckets:

• Properties already owned, or under contract, at the time of the budget remain grandfathered while held.
• New builds, including a home on vacant land, a new apartment or a site where one dwelling is replaced by more than one, retain full negative gearing benefits. The definition is narrow, so the specific project structure matters.
• Established homes purchased after budget night face quarantined losses from 1 July 2027. Those losses can be carried forward against future rental income or capital gains, but cannot reduce salary income. For established properties bought since the budget in May, the existing treatment continues until 13 June 2027.

The practical result is straightforward: the tax-supported “push” into established property has become more expensive.

Melbourne prices are falling while rents rise

Ripehouse Advisory measured 271 Melbourne suburbs with enough sales activity to analyse properly. Since March, two in three suburbs are lower, and almost 40% are down by 5% or more.

The pattern becomes more pronounced at higher price points:

• Around $750,000, 62% of suburbs are lower.
• Between $1 million and $1.5 million, 79% are lower.
• Above $1.5 million, 94% are lower.

That matters because higher-income investors have historically been more active in these price brackets. When the tax benefit changes, the buyer pool for established property can change with it.

At the same time, rents have risen 4.2% over the year, while Melbourne’s vacancy rate is 2.4%. Across 104 suburbs, Ripehouse Advisory found prices falling while rents rose.

That combination can improve rental yields. It does not mean every property is attractive, but it does create an opening for investors who can assess cash flow, holding costs and future buyer demand properly.

Why the street matters more than the suburb median

A suburb-level median can hide very different results. Ripehouse Advisory’s street-level analysis found streets where prices were holding, while streets only two minutes away were seeing falls — despite the same broad interest-rate and tax environment.

The key distinction was the share of owner-occupiers. Streets that held up were mostly supported by people buying homes to live in, rather than investors buying primarily for a tax outcome. Streets that fell had been more reliant on investor demand.

This is the emerging property-market divide: the economy may determine the average, but the street determines the result.

For buyers, the question is not simply whether a suburb has performed well. It is whether the specific street has enduring appeal to owner-occupiers, tenants and future buyers. A property that would be comfortable to hand to your children in 20 years is likely to have a stronger foundation than one dependent on the next investor receiving the same tax benefit.

Four investors, four different decisions

The impact of the negative gearing changes is not identical for every investor.

1. The grandfathered holder

Your tax position may not have changed, but the buyer pool around your property may have. The important question is whether the property is strong enough to appeal to owner-occupiers when you eventually sell.

2. The new-build buyer

New builds retain the tax benefit, but tax-effective cash flow should not be confused with total wealth creation. Ripehouse Advisory studied 7.5 million sales and compared turnkey new homes with established properties over time. The new home produced better cash flow, including around $13,000 a year in tax benefits. After just five years, however, the established property finished around $250,000 better off in total.

The tax benefit is real. It is simply not the same thing as a strong asset.

3. The established-property buyer

With losses quarantined, yield and holding costs become more important. The Melbourne suburbs where rents are rising and prices have fallen may warrant attention, but only after street-level assessment and proper cash-flow modelling.

4. The high-income first-time investor

The old shortcut — buy almost anything and let the refund do the heavy lifting — is no longer sufficient. This buyer has less room for error and needs an asset that can stand on its own without relying on salary deductions.

Three rules for buying property now

1. Buy the asset, not the tax break

Assess the location, the rent, the holding costs and the people likely to want the property later. Tax treatment should support the decision, not make a weak purchase appear affordable.

2. Buy the street, not just the suburb

Two streets in the same suburb can produce different outcomes. Suburb medians are useful context, but they cannot replace local research into owner-occupier demand, property quality and buyer depth.

3. Follow the sequence: push, consolidate, then pull

The long-term strategy is to build an asset base first, consolidate it, then shift towards assets that provide contracted income for retirement, family and legacy goals. When the tax office no longer subsidises the push in the same way, getting that sequence right matters more.

The Ripehouse Advisory take

The negative gearing changes in Australia do not remove the case for property investment. They raise the standard for property selection.

Investors now need to understand which rules apply to their property, model the real after-tax holding cost and identify locations where rental demand and future buyer demand are resilient. The Ripehouse Advisory data shows why broad market headlines are not enough: Melbourne prices and rents are moving in opposite directions, and outcomes can differ within the same suburb.

For anyone who cannot comfortably hold a property without the salary deduction, building buffers before buying is a more disciplined approach. For those who can hold, the opportunity is in finding the right asset, on the right street, at a price supported by fundamentals.

Budget Worksheet: https://www.ripehouseadvisory.com.au/worksheet-budget Investor Decision Review: https://www.ripehouseadvisory.com.au/review