How Investors Are Responding to CGT & Negative Gearing Changes
The recent Federal Budget changes to capital gains tax (CGT) and negative gearing have been widely covered, including our national overview of what’s changing and what it means for property owners.
What’s emerging now is how those changes are playing out on the ground, particularly in Western Australia, where market conditions are already very different to the eastern states.
A quick reminder: what the policy is trying to do
At a high level, the direction is clear. The Federal Government is aiming to shift investor demand away from established housing and toward new residential supply, supporting construction activity and improving affordability over time.
While the detail is still subject to legislation, the intent is already influencing investor sentiment.
Why WA is different right now
Western Australia continues to perform strongly relative to the eastern seaboard. While listing volumes have increased slightly in recent months, the market remains fundamentally undersupplied, with demand still outweighing available quality stock. This imbalance has driven highly competitive conditions, particularly from traditional investors chasing both yield and capital growth.
Unlike softer eastern markets, WA is still defined by scarcity rather than surplus. This makes the local response to policy changes more nuanced.
The likely impact: investor behaviour, not immediate price shifts
The potential impact of these proposed changes is therefore less about an immediate market shift, and more about investor behaviour.
In the short term, we are likely to see a degree of hesitation from traditional investors. With uncertainty around how and when the changes will be implemented, many are expected to adopt a “wait and see” approach. This could temporarily ease some of the competitive pressure that has been a key feature of the WA market over the past 12–18 months.
Over the longer term, if the policy is enacted in its current form, established investment properties may become less tax-effective for individual investors. This does not remove demand entirely, but it does change the dynamics of how investors assess opportunity, particularly when compared to new construction.
SMSF investors may gain an edge
One of the more interesting outcomes is the relative position of SMSF investors. Current contrast to traditional investors, SMSF buyers are unlikely to be directly impacted by the proposed CGT adjustments.
In a market that has been heavily driven by investor competition, even a modest pullback from traditional buyers can shift conditions.
This may create:
- Improved access to stock
- Less urgency in decision-making
- Stronger negotiating positions in certain segments
For SMSF investors, and well-advised buyers more broadly, this could represent a meaningful, if short-term, advantage.
It is also important to recognise that these measures are not yet law, and any implementation is still some time away. That said, markets often respond to sentiment well before legislation is finalised. As a result, we may begin to see these behavioural shifts emerge in the near term.
The key takeaway is that while the headlines focus on tax changes, the real impact is likely to be seen in how different buyer groups respond. In WA, where fundamentals remain strong, this could present a short to medium-term window of opportunity, particularly for those able to act decisively while others pause.