Property Investment Plummets Amid Interest Rate Hikes and Tax Changes

Property investment across Australia fell 9 per cent in the June quarter as four interest rate hikes and proposed federal budget tax changes cooled buyer demand, according to the Real Estate Terri Scheer Investor Report released today. The report found that while established rental property lending declined, buyers increasingly shifted their focus toward higher-yielding units and regional housing markets.

Interest Rate Hikes and Tax Rule Changes Drive the June Quarter Decline

Realestate.com.au Senior Economist Angus Moore said the May federal budget announcement regarding changes to the capital gains tax discount and negative gearing for established rental properties heavily influenced investor loan volumes alongside Rba rate hikes. Over the long term, the budget changes may lead to a shift in investor demand, as investors look towards properties with higher yields, Mr Moore said. He added that low-yielding and loss-making rental properties are expected to lose appeal because negative gearing will no longer apply to existing residential properties.

Realestate.com.au economist Luc Redman noted that the pullback affected multiple states. NSW, in particular, had quite a strong pullback initially from the higher interest rates and that higher cost of borrowing, but we’ve seen that across basically Queensland, Western Australia and Victoria, Mr Redman said. Despite the broader cooling in established property loans, lending for the purchase or construction of new homes rose 24 per cent over the period.

Yield Shifts and Capital City Hotspots Shape Investor Purchasing Patterns

Data within the report shows investor inquiries pivoting toward cash flow and higher rental returns. Approximately 93 per cent of investment property resales executed so far in 2026 sold above their original purchase price. Metro area investors skewed heavily toward units, apartments, and semi-detached dwellings, while regional buyers continued to target houses at comparable price points.

In Sydney, top investor housing markets included North Richmond, Austral, and Airds with rental yields of 3.4 per cent and above, while Moorebank, Chipping Norton, and Melrose Park led for units at 4.8 per cent and above. Melbourne investors targeted Coolaroo, Meadow Heights, and Carrum for houses at 3.6 per cent and above, alongside Flemington, Notting Hill, and Burwood East units returning over 5.5 per cent. Brisbane recorded house yields at 3.9 per cent and above in Lowood, Laidley, and North Booval, while Waterford West, Fortitude Valley, and Thorneside units achieved 4 per cent and above.

Adelaide housing investors focused on Elizabeth Park, Eyre, and Elizabeth East for yields of 4.3 per cent and higher, with Plympton, Salisbury, and Walkerville units matching those returns. Perth house yields reached 4 per cent and above in Lockridge, Brookdale, and Two Rocks, while Leederville, Jolimont, and East Cannington units topped 5 per cent. Canberra recorded house yields above 4 per cent in Banks, Strathnairn, and Calwell, with units in Harrison, Mawson, and Denman Prospect exceeding 5.5 per cent returns.

Rental Market Rebalancing and Long-Term Market Equilibrium Ahead

Terri Scheer Executive Manager Carolyn Parrella noted that persistent rental demand and improving yields keep residential property attractive for long-term investors. While Australia’s property market is evolving, this report shows there are still compelling opportunities for investors who focus on strong fundamentals, Ms Parrella said. Mr Redman projected that rental yields will rebalance over the next six to 12 months as softening home prices and low vacancy rates drive price adjustments, allowing investors to re-enter the market and establish a new equilibrium.

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