The 2026 Australian Federal Budget has delivered one of the most significant proposed shifts to residential property investment policy in recent history, with sweeping reforms to negative gearing and capital gains tax designed to redirect investor demand away from established homes and toward new housing supply. For Perth, however, the story may not be so straightforward.

According to DUET Director Michelle Kerr, while the government’s broader policy goal is clear, Perth’s uniquely undersupplied market may respond very differently. “This budget is not tinkering around the edges. It is an enormous shift in how the government wants Australians to invest in housing.”

A Major Shift in Investment Strategy

Under the proposed reforms:

• Negative gearing will be limited to newly built properties from 1 July 2027
• Existing investment properties purchased before 7:30pm AEST on 12 May 2026 will be grandfathered
• The 50% capital gains tax discount will be replaced with cost-base indexation and a 30% minimum tax on net capital gains from 1 July 2027

In theory, these reforms aim to encourage investors to fund new housing supply rather than competing with first-home buyers in the established market.

But Michelle notes Perth’s conditions create a more complex reality.

“The clear message is, if investors want tax benefits, the government would prefer that money goes into new housing, not just competing with first-home buyers for existing homes. But as always with property, the theory is one thing. The Perth market is another beast entirely: slightly feral, very undersupplied, and not known for patiently waiting while policy catches up.”

Why Perth Could Feel This More Than Other Markets

Perth’s property market continues to be shaped by:

• Strong population growth
• Limited rental supply
• Construction cost pressures
• Labour shortages
• Planning and infrastructure delays

Associate Director Jake Polce thinks that this means investor hesitation could have more immediate consequences than in better-supplied eastern states markets.

“Perth has a very tight rental market, limited established stock, strong population growth, and ongoing supply constraints. So, in my experience, anything that makes investors pause, particularly mum-and-dad investors, matters.”

The negative gearing reform will likely be the biggest immediate factor, with CGT changes also likely to alter investor sentiment. “Investors don’t just buy for cash flow. They buy for long-term capital growth. If that upside is taxed differently, some will rethink the risk/reward equation.”

Where Investor Demand May Shift

Rather than exiting altogether, some investors may redirect into:

• New apartments
• Townhouses
• House-and-land packages
• Emerging growth corridors

However, Michelle warns that uncertainty alone could slow investment activity. “Perth needs more rental supply, not less. The government wants investors to help create new supply, but new supply in Perth is not something you just whip up overnight.”

What About First-Home Buyers?

For first-home buyers, reduced investor competition in affordable established markets may create some opportunity, particularly in:

• Villas
• Units
• Townhouses
• Entry-level suburbs

But Michelle cautions against overstating the likely impact. “The benefits may be ‘slightly less pressure’ rather than champagne and keys by Friday.”

Affordability, borrowing power, and limited stock remain key barriers.

Rental Market Risks Remain

Perth’s rental market remains one of the tightest in the country, with:

• Vacancy rate: 2.0% (March 2026)
• Median weekly rent: $730 for houses
• Median weekly rent: $700 for units

If fewer investors purchase established rental properties, supply could tighten further. “In the short term, I would not expect rents to fall because of this budget. If anything, the risk remains on the upside unless new supply genuinely comes through.”

Does the Budget Solve Perth’s Supply Problem?

In Michelle’s view: not yet.

While the $2 billion Local Infrastructure Fund is a positive step, Perth’s supply challenges run deeper than tax policy alone.

Jake warns that Perth’s problem is not that people don’t want homes built: "It is that getting homes built has become slow, expensive and unnecessarily complicated.”

Final Thoughts

For Perth, this budget represents a policy experiment with good intentions, but uncertain execution.

The likely outcome?

• Established investor stock may soften
• New-build demand may strengthen
• Rental pressure may persist
• Supply constraints remain the defining challenge

Michelle’s final assessment is measured but realistic:

“The budget is trying to redirect investment from existing homes into new housing. That is a sensible policy goal. But Perth’s challenge has and always will be supply. There’s good intention, a mixed execution, but Perth will remain Perth: undersupplied, competitive, and stubbornly allergic to simple solutions.”

To view the Federal Budget, visit budget.gov.au.