The investor slowdown reshaping buyer demand

The PropTrack-Terri Scheer Investor Report 2026 found that changing market conditions led investors to shift strategies and target new-build residential assets.

The report found that loans for building or buying new homes rose 24 per cent, an intended effect of the government’s property tax changes.

According to the report, the uptick in interest in new-build homes was part of the intended impact of the government’s changes to negative gearing and capital gains tax.

While investor loans fell by 9 per cent, owner-occupier loans fell by a more moderate 3 per cent.

Terri Scheer executive manager Carolyn Parrella said that despite an overall pullback in lending, opportunities remained for residential property investors.

“The findings show investors aren’t necessarily leaving the market; they’re adapting to it,” Parrella said.

“While Australia’s property market is evolving, this report shows there are still compelling opportunities for investors who focus on strong fundamentals.”

Factors driving the investment drop

REA Group senior economist Angus Moore said the changes to property tax settings have significantly altered investor activity.

He said the changes to negative gearing and the capital gains tax discount had reduced the appeal of the established residential property market for investors.

“Over the long term, the budget changes may lead to a shift in investor demand, as investors look towards properties with higher yields,” Moore said.

“Low-yielding and loss-making rental properties are likely to become less attractive to investors, as negative gearing will no longer be available for existing residential properties.”

Before the federal budget, investors typically prioritised capital growth over yield because they could deduct losses from taxable income, but Moore said the changes meant the strategy was no longer viable.

He said the data showed a major share of investor enquiries had shifted toward higher-yielding assets.

“That’s consistent with the expectation that investors may already be shifting some demand away from negatively geared properties towards assets that are higher yielding and more likely to be cash flow positive.”

Moore said any changes in the pace of investor sales over the coming years would likely stem from budget tax changes.

“The grandfathering of negative gearing for existing investors is likely to have a modest ‘lock-in’ effect to discourage some investors from selling.”

“On the other hand, some investors are likely to want to sell ahead of the 1 July 2027 change. For those investors, holding a loss-making asset whose price growth is going to be taxed more heavily may make that strategy less attractive.”

Where investor activity paid off

The report found that 93 per cent of investors who sold their assets in the three months to the end of July achieved a profit.

Brisbane led the capitals for profitable resales, with 99 per cent of resales in the river city selling at a median profit of $520,000.

The other mid-sized capitals, Adelaide and Perth, achieved similar results, with periods of rapid growth supporting their property markets.

Conversely, Melbourne saw the lowest share of profitable resales, with just 85 per cent achieving a gain.

Moore said the high overall share of returns across the mid-sized capitals reflected their strong price growth performance in recent years.

“That’s most starkly reflected when looking at the geographic differences in recent resale profitability – effectively, all recent investor sales in Brisbane, Perth and Adelaide have been profitable, reflecting the enormous growth in home prices those cities have seen in the past six years,” Moore said.