Sydney property investors abandon market over tax changes

Real estate investors in Sydney have stepped back almost completely from established property purchases, a national mortgage brokerage claims.

According to insights from mortgage brokerage Home Loan Experts, the investor retreat has begun in earnest, even though newly legislated negative gearing and capital gains tax rules are not scheduled to take effect until July 2027.

MORE: Striking scenes at Sydney open homes

Investors are holding off on buying amid fears of price falls. Picture: Damian Shaw

---

The pullback has been sudden and pronounced across the brokerage’s client base.

Jonathan Preston, a broker at Home Loan Experts, described the current market sentiment as highly cautious.

“My investor clients have essentially stopped buying established property,” Mr Preston said. “They are worried prices will fall before the rules start, so they are waiting.”

Under the newly passed negative gearing rules, investors will only be able to claim gearing deductions on newly built homes, from July 2027, while capital gains tax will be charged based on an indexation system linked to inflation.

The investor exodus is already putting downward pressure on property values.

Data from PropTrack revealed median house values fell across 91 per cent of Sydney suburbs in the July quarter.

MORE: NSW’s top suburbs for first-home buyers

Treasurer Jim Chalmers said this 2026 budget is meant to improve housing affordability. Picture: NewsWire / Martin Ollman

---

Median unit values fell across 69 per cent of the suburbs with available data over the same period. There were about 400 suburbs where the median value drop was over $50,000.

Senior mortgage broker Prakash Rai confirmed that the freeze is widespread.

“Right now none of my investor clients are buying,” Mr Rai said. “They have stepped back completely and are waiting to see where prices land.”

Mr Rai noted that even active owner-occupiers, upgraders, and new buyers were exercising caution, holding off slightly in anticipation of further price softening.

MORE: ‘Cooked’: Landlords not allowed to rent homes

Mortgage brokers are warning less investor properties could push up rental prices. Picture: Jonathan Ng

---

The effect of the policy changes is particularly evident among high-income professionals who had once been highly motivated to buy.

Mortgage broker Sheng Ye revealed that multiple high-value clients had actively walked away from the market.

“Two of my pre-approval clients have pulled out and will not proceed at this stage,” Ms Ye said, identifying the clients as an accountant who serves as a company CEO, and a solicitor running his own law firm.

Both chose not to extend their investment loan pre-approvals, she said.

“These are people who were very motivated to invest when the market was running hot,” Ms Ye added. “They told me the recent negative gearing and capital gains tax changes have discouraged them, and they are no longer looking at property investment.”

Source: PropTrack AVM, July qtr.

---

Broker Mary Eskander said it was the capital gains tax changes that were proving problematic for a lot of investors.

“I actually think the negative gearing change is fair enough,” Ms Eskander said. “It is the CGT change that worries me, or more precisely the amount they have set it at. That is the real failure, and it is what will cost Australia in the long run by driving investment out of the country and hurting future generations.”

Jonathan Preston, mortgage broker at Home Loan Experts said investor clients had stopped buying.

---

Mr Preston said that the long-term outlook for the market as a whole still remained strong.

“Sentiment is very weak right now and people are scared, with the wealth effect of falling equity in full force,” Mr Preston observed.

“But longer term I expect inflation to keep easing and rate cuts to follow, and for buyers who can act, this is shaping up as a real window.”