Federal Budget 2026: what it means for property (ep818)

Added: 2026-05-14

[00:00:03]Hello and welcome to This is Property with John Pidgeon and Rachel Crewen. It is the morning after the federal budget.

[00:00:10]We want to go through what's actually changed, what's been confirmed.

[00:00:14]Obviously, nothing's been rubber-stamped officially as yet. It's all a proposal that needs to get passed through Parliament. Um but Rach, we wake up bleary-eyed and yeah, whether we sat through it or not, uh we've got our thoughts and opinions on it, which we're going to give, but we're also going to go through some facts of what we're seeing right now in the property space only. That's right. So, John and I were madly texting each other as we were watching the the budget last night because obviously we're interested in the the whole economy, but we want to talk today just about how it impacts property and people wanting to get into the property market. Who are the winners and who are the losers? [music] Hi, I'm John Pidgeon, founder and director of Envisage [music] Property Buyers Agency Service. And I'm Rachel Crewen, founder and director of Sphere Home Loans. [music] We also support this podcast. This is a show for Australians that want to make smart and informed property decisions. And to be kept up to date with the ever-changing lending landscape.

[00:01:11]>> We would love for you to join the discussion in the Australian Property Chat Facebook group. Thank you so much for joining the show. [music] We are glad you're here.

[00:01:22]Probably the two main changes for us high-level is is negative gearing and the changes to capital gains tax.

[00:01:31]There's obviously the discretionary trust changes as well. So, that's probably doesn't affect too many of our listeners, but just understand that the there are some uh some implications now if you're going to buy in a in a in a trust or a company, I suppose, and then distributing profits through you're going to be penalized heavily from a tax point of view. That's right.

[00:01:52]So, let's just highlight the changes.

[00:01:53]So, one, there's negative gearing, which is from today, if you buy a property that isn't new, Yeah. you will have new rules that mean you don't have the same negative gearing benefits that if you exchanged on a property yesterday.

[00:02:07]John, do you want to explain what those benefits might be from a I guess a real perspective and I'll go in by lending perspective.

[00:02:13]>> Yes, yeah, cuz that's I'm interested to hear that stuff. Um so, the negative gearing, let's just give a quick example. So, as it stood yesterday and and prior to the budget last night, if you owned an investment property, it was rented out and it was getting let's say 40 grand of income, um but it was costing you 50 grand to hold for the financial year the the tax year, that's a loss of 10K.

[00:02:39]Um you could take that 10K and apply it against your taxable income, your whole taxable income, and you could claim portion of that back based on your tax rate. So, if your tax rate was 40%, I'm just doing an easy maths figure here. Uh 40% of 10K gives you a 4K tax return or refund uh in your pocket once you do your tax return. So, that was up until 7:30 last night. So, that's going to be grandfathered. Nothing changes. If you own existing investment properties, you'll continue to be able to do that.

[00:03:10]Uh if you exchange contracts yesterday, you would also come in under that old rule. So, if you doesn't matter if it hasn't settled yet, doesn't matter if it's not rented, etc. If you exchange contracts yesterday and it's dated um by uh with the vendor and the uh and and you as the purchaser, then you'll um you've just scraped in. Yeah, so just for clarity, if somebody owned five properties that are already negatively geared and they're not planning on buying a new property, there is zero change to that person. We thought there may be some We thought we weren't sure that the We thought there may be some changes where there if you had one or two properties, they'd cap you out. But it at the moment, the change is only for new properties being purchased.

[00:03:57]>> Yes, new acquisitions as of 7:30 last night, essentially. Which is shocking.

[00:04:02]Were you shocked by that? Yeah, I thought they would have come down a bit harder on uh larger portfolios. Um might have capped it at two properties that you can negatively gear and the rest were were not, but yeah, I think cuz cuz on one hand they want to penalize the um the baby boomers, but on the other hand and and also help out first home buyers, but that hasn't penalized those with large portfolios, which arguably are older folk, you would say. Yeah, I can't believe you said baby boomers on this episode because I feel like the government just pushed that narrative Yeah. down our throats of that different generations. I feel like they really tried to turn generations against one another rather than talk about the problem, which is housing supply.

[00:04:45]>> That's right. And they say, "Look, it's a it's a Gen X thing. Like it's yeah, we we're we're trying to help out the young people." I'm arguing that maybe they didn't do a great job of that, but anyway, we'll go into we'll go into detail a bit later. So, negative gearing is still on the table for new properties though. So, if somebody went to So, I feel like what they're trying to do here is encourage people to build property rather than buy existing stock, which is really what the property market needs.

[00:05:14]We need property, but do you think this will work? Ooh, that's such a that's such a big question. Will it work? I think what it will do, it will maybe deter investors from from purchasing multiple properties. I think it'll absolutely do that, existing properties at least. Will it Will it make investors buy brand new property to claim the negative gearing, claim the depreciation, all those things that that have come with new properties?

[00:05:42]Um I I think it will.

[00:05:44]However, my concern is post-COVID build price are so expensive. Land prices are so expensive. So, and I was knowing that this is probably on the cards. I've been speaking to a lot of builders and developers and and people I know in the in the trade and and they're like, "Okay, when we combine our land and build together, there's not many places around the country in decent areas where we can get stock at an affordable rate." And I know you're going to talk about lending in a minute, but when I say affordable, like can you buy a house and land package now for 700,000? Yeah, maybe in some areas, but they're definitely not capital cities and they're definitely not large regional locations unless the land size is really small. So, I think it'll lead to potentially things like one-bedroom apartments. And and we've spoken about, I suppose, that supply and demand and and what historically performs well in in the property space. And I think investors need to be really careful of what it actually uh what what they're actually buying just for the sake of getting a tax benefit, but we'll we'll talk about that a bit later, but will [snorts] it create more energy around building new homes? Absolutely. Yeah.

[00:06:56]And and I if if it reaches that goal, amazing. Um so, just just to recap, so the changes to negative gearing are if you exchange on a property from today onwards, you're under the new rules, which is if you buy an existing property, you don't get negative gearing benefits. If you buy a brand new property, you do. Businesses usual. If you own existing if you have property already that exchanged from yesterday or before, you're under the new rules and you're protected under negative gearing regardless of the amount of properties you hold. Yep. That's a great explanation, Rach. The other one was, of course, capital gains tax.

[00:07:31]>> Yes. So, again, the old scheme, uh which again will continue on for those that currently hold property, is uh essentially, if you hold the property for longer than 12 months, you get a 50% exemption on the gain when you sell it. So, again, clear numbers. I bought the property for 500,000.

[00:07:51]It's now worth a million dollars. When I sell it, I've hold I've held it for longer than 12 months. Uh I've got a gain of 500,000. 250k of that is exempt.

[00:08:00]I don't pay any tax on. I pay tax on the remaining 250. Yeah, that is correct.

[00:08:04]>> And then for the big the big shock with capital gains for me was that pre-1987 85 >> 85, sorry.

[00:08:11]>> Yes. So, pre-85, if you if you're old enough uh and you own property [laughter] and you're listening into this uh and uh I was learning to tie my shoes.

[00:08:21]>> [laughter] >> Yeah, I was uh what was I eight? So, I had no property by then. Um but, yeah, so they weren't paying any tax.

[00:08:30]>> Nothing. They were just like uh the gravy train, free ride. Um so, weirdly or not weirdly, but it's it's a massive call to say to those people that own investment properties, "Hey, you're now under the new system." Yeah.

[00:08:46]Um now, July 1 next year, 20 2027, is essentially the there's a there's a period between now and then where it leads into.

[00:08:56]>> Yeah, so that's for both we didn't actually talk about that negative gearing. So, that's for both the negative gearing and the capital gains.

[00:09:02]They're giving a year's grace period until July next year for everyone to kind of you can still claim negative gearing for the year and you can still uh there's some capital gains changes.

[00:09:12]However, it's only so everyone can get used to the legislation and banks can catch up and accountants can learn what they do. The rules are still even though there's that year's get grace period for negative gearing, it the rules still change from today. Right. Yeah, correct.

[00:09:25]So, it may mean that a a lot of people will decide to sell their property during that time. It may produce new stock. It may not. Who knows? Who knows what people are thinking out there, but >> I think people will hold their properties. Yeah, well, the general consensus is why wouldn't you?

[00:09:41]Um, but yeah, it it's uh everyone's situation is different, of course. So, So, the capital gains changes, explain the news to explain to us what is the new norm. Yeah, so it's it's now reverting to the inflation method, which was pre-1999 or sorry, brought in in 1999 and then taken out. Yeah, that's So, and that's to go up with inflation or CPI. Yes, correct. So, uh let let's call inflation at 3%.

[00:10:08]>> Yep. Right, so if we get a a property gain or sorry, a capital growth of um 6% and inflation for that year was 3%, then we're going to um essentially be taxed at that 3% rate.

[00:10:27]So, we've taken the capital growth and the inflation and then split the difference or taken the difference there. So, essentially we're paying tax on that 3% or capital gains tax on that 3%. Um, so it really does depend. This is where it gets really confusing and complicated is is like what's the capital growth rate going to be on my property versus what's the inflation rate? Yeah.

[00:10:50]>> So, if the capital growth rate is is uh is large, i.e. 10, 12%, and the inflation rate is down to like 2%, then I'm paying a large amount of tax, right?

[00:11:02]Now, I did some really rough figures and I was speaking to a few people about this smarter than me.

[00:11:08]I think on average we're probably holding the property between 10 to to 14 years to be able to get that 50% gain that we're currently getting. Yeah.

[00:11:18]>> So, I don't think it's a massive massive game-changer from a capital growth point of view and oh sorry, a capital gains point of view. I think it's um if we're holding the property long-term like well, I know majority [clears throat] of my clients are definitely doing that. Uh I don't think it's a massive change. So, yeah, the negative gearing aspect may hit more so than the capital gains change. Yeah, okay. Mhm. And then the I guess the third change that we didn't really go into is trusts. Um and I know we're not going to go into that in detail, but I guess the big thing is they're going to start taxing discretionary trusts. So, they need to pay a minimum of 30% tax, which is actually pretty huge at the top end of town. Um I'm hearing different commentators saying, especially property commentators, saying that none of the budget is impacting the top end of town, but to me that sounds like it will. Yeah, it sounds like it will.

[00:12:09]Uh like it Well, it has to because essentially you're going to be uh essentially double taxed, aren't you, when you uh initially if you're taking money and putting it through a a family trust, for example, and then sending it through to a um a a bucket company or something like that, then you're going to be taxed twice is my take.

[00:12:31]>> again, we need it to be legislated. We don't know all the facts yet, but if that's the case, it is going to impact the top end of town because that is the sort of vehicles people use to hold multiple properties and share the wealth between their families. Yeah, totally.

[00:12:43]Um absolutely. And so, yeah, you're pretty much locking in a 30% tax rate um across the board as a as a minimum that we're going to be paying um which yeah, again, you you make a a 100% profit, so so your property doubles and you just need to give 30% of that away.

[00:13:06]I'm okay with that. Yeah, and then from my understanding of what they explained with the negative gearing, so let's go back to negative gearing. So, you can't offset that against your PAYG income anymore. So, you know, you know, if you're on a $150,000 a year and you get a $10,000 loss, you can't take that off your taxable income, but you can still trap that loss for later. Yes, now you've got to be careful on this because uh again spoken to [laughter] a few people about this early morning and uh we're all getting sort of um sleep out of our eyes when we're doing that but essentially what it means is if if I've got a again in that example if I've got a 10K loss I can carry that lot 10K loss forward but I can only offset that against a positively geared property.

[00:13:52]Right? So if I've made a 10K gain on another property then I can offset that 10K loss against that 10K gain. Okay.

[00:14:01]>> can't offset it against a capital gain when I sell the property. Okay.

[00:14:06]>> Right? So that's the bit of a not gray area but it's just an area where we say okay if we've got a positively geared property and there may be a few of us out there or um over the journey that might be focusing on positive geared property which is as you know harder than it was 20 years ago you're not necessarily paying tax on it if you have a negative um loss somewhere on another property.

[00:14:30]Yeah, so really people who have multiple properties are still winning, aren't they? Going forward, yes, correct. But the trick is which we're going to talk to now Rachel and lending and just how hard or easy it is to get into uh property based on the fact that the banks are looking at this a little bit differently now if we're not able to negatively gear property. Yeah, and that so let's talk about the banking impact because I think the real figures might be you know on a property you know that example you gave to us earlier you know that person's it's you know $6,000 less in their pocket a year to be you know holding a a property when you take into consideration the um the changes of last night but I think the banking impact is going to be huge and just remember this is the morning after I have no idea what the banks are going to do but I've made some assumptions.

[00:15:14]>> Okay. Well it's it's it's dangerous to assume.

[00:15:16]>> I assume that because if you look at a bank they go okay so negative gearing we can have it for another year, but if you think of any income that a bank accepts as income in the in the calculator, it's got to be ongoing for more than 5 years.

[00:15:30]So, I feel like if I was sitting in a major bank today and I'm in the credit team, what I'm going to do is say, "Well, from today or whenever they can implement it, we're going to take negative gearing out of our servicing calculator."

[00:15:41]Because how can they allow negative gearing to be used in the servicing calculator when there is only a year left of negative gearing? So, not for properties that have been held, not for your investor that was I'm talking about a person that's going to buy a property today, an investment property today. I believe they'll go, "Okay, no more negative gearing in the calculator."

[00:15:57]That makes some huge changes to what people can borrow. Because it's not that $6,000 that's the actual. Negative gearing gets worked out in a different way on the bank's calculators because there's assessment rates and you know those buffers. So, the negative gearing makes a huge impact. So, I'm going to give an example of a client that is a real client that was, you know, you know, pre-approvals ready to buy. He's He's on $95,000 a year. He has a help debt, but he lives at home rent-free with his mom and dad. His parents were going guarantor for him to buy a property and he was pre-approved. He's pre-approved right now to buy a property for $750,000.

[00:16:34]This is a real-life example. So, this morning when I woke up, I looked at his servicing calculator and I took the negative gearing off. So, the just for people's reference, you go into your system, your mortgage broking CRM, and you just click a button that says negative gearing Yeah, on or off. And some banks use negative gearing, some don't. But obviously it's a big difference in borrowing capacity. So, let's go let's go in and I took negative gearing out. His loan amount went from $750,000 to 400 and $50,000.

[00:17:06]That's That's huge. That's the This person's not going to be able to buy a property without using negative gearing and people can argue, "Well, we don't want investors to invest." But this isn't a big investor. This is a guy who can't afford to buy a house to live in, so he's rent vesting while he lives at home hoping to be able to buy a home to live in. And he's going to be collateral damage. Yeah. Yeah, for sure. So, you you mentioned before that some banks take into account negative gearing, some don't. Yeah, which is why there's such a a large difference to what you can borrow across across lenders if you're an investor.

[00:17:40]>> Yeah, okay. So, when when I look at that um and the banks are waking up having the same news presented to them um if I'm a lender that um takes into account negative gearing, I've just lost a portion of my business because those people are not going to come to me to lend money from me.

[00:17:59]Um whilst other banks that have negative gearing um not not applied, business as usual.

[00:18:06]>> but let's throw something else into the mix because we said this negative gearing change is only for existing property. So, this using this example, >> Yes. I mean, I'm imagining if things change today, we'll say, "I'm sorry, you can't borrow 750 anymore. You can only borrow 450 unless you buy a new property." Yes. And is the intent of the budget to encourage people to buy new property? Well, in this case, that's your choice.

[00:18:30]>> Yeah.

[00:18:31]And that's um opens up another can of worms. It's like, "Okay, now investors are are putting their investment hat on and saying, 'I want to invest somewhere, shape or form because I love Australian property and I love the wealth creation tool that it is.

[00:18:45]Now it looks very attractive to go and buy brand new property, whether that be off-the-plan apartments, whether it be house and land because the oh, sorry, the government want to create new housing because we've got this undersupply of property and people need to be housed somewhere. So, investors, go for your life. You've got no um strings attached. You can negatively gear. You've um you can go to town, get all your depreciation you want um but it's got to be absolutely brand new. It can't be 1 year old, it can't be 2 years old, has to be newly constructed. Or nearly never lived in. Now, let's go let's use one more scenario before we jump on to talk about new properties cuz I think that's going to be a big change from this budget. But this is probably I gave you that one example because it was on my desk yesterday, but that's not the norm. The rent vestor probably isn't the majority. This example, which is one of Genevieve's clients actually, this is probably more what the norm is going to be of who's going to be impacted. This is a a married couple.

[00:19:41]They've got a mortgage on their own home. Their own home's worth a million dollars.

[00:19:46]They've got a $490,000 mortgage. So, they've got some good equity.

[00:19:50]>> Yeah.

[00:19:51]They've got a $165,000 joint income. They have two small children. They're planning on buying an investment property. Haven't been pre-approved yet, but they can borrow about $500,000.

[00:20:02]They're looking at buying a small regional property.

[00:20:05]>> Yeah. Invest. Their borrowing their borrowing capacity with negative gearing was 500, without is 350.

[00:20:11]>> Right. And somebody said, "Well, you might be able you can only buy a new property, which we're going to talk about.

[00:20:16]Where do you buy a new property for that?"

[00:20:17]>> For 500,000. Yeah, build costs have gone up, land prices have gone up.

[00:20:22]So, are we going to get more properties being built by investors on that basis? The answer's probably no.

[00:20:30]Not a lot.

[00:20:31]>> neither of those examples are the people that you know I I see all that you know people are so against investors at the moment to go you know this is what we've got this huge you know supply issue.

[00:20:40]But these aren't the people that are in your mind when you think about that.

[00:20:43]These are people that are thinking I need to be able to buy a property so I can one day afford to buy something to live in and I'm hoping to hold one property so I'm not relying on the pension and retirement.

[00:20:53]>> Yeah, I'm living in Sydney or I'm living in Brisbane and I can't afford to buy where I live so I'm going to stay at home or I'm going to pay rent which is through the roof and I'm I can get in for 500 or 600 otherwise to buy locally it might cost me 1.2 or more so I'm going to have a stepping stone, which is an investment property.

[00:21:10]>> these kind of people are going to be pushed in new property. That might be great because we need supply, but tell tell us a little bit more about how you think that's going to play out if people do, I guess, move to that sort of stock.

[00:21:21]Yeah, and I think we spoke about it a few weeks ago on the podcast where build prices have just gone through the roof.

[00:21:26]Like, I'm real life example, exhibit A, me.

[00:21:30]We built a property um $1,800 a square meter. That's same build now is 4,000 a square meter, right? Same inclusions, same standards, etc. >> 4,000 a square meter?

[00:21:42]>> Yeah, from 1,800 to 4,000 basically is where that's gone to. So, now um that is obviously a custom build, not spec. Um not project, sorry. So, when you look at the project space, you've got also a an a major increase in that. But, also what's happened in the last 5 years is land prices have gone through the roof as well. So, again, speaking to builders, speaking to developers, speaking to people on the ground in the know that pick up a um pick up a hammer each day, they're saying, "Right, if you if you're paying and take an example in like Bendigo right now in country Victoria. So, um population 100,000 people, so not small. You you're looking at land of anywhere between 350 to 400k.

[00:22:29]Yeah, okay.

[00:22:29]>> Just for the land.

[00:22:31]Can you build something for 400k?

[00:22:34]Maybe, but it's going to be bare bones, right? Minimum sort of standards sort of stuff. So, that packs up at about 800k.

[00:22:42]How many investors or how many owner occupiers can actually buy something for 800k plus these days? I don't know through your um clients rates as to what the average buying capacity would be, but what percentage would you say can borrow 800 or more?

[00:22:59]>> I I would probably say it's about half of investors that we would deal with probably do get pre-approved over 800.

[00:23:05]Okay. And I would think without negative gearing that would change dramatically because you got to think you take the negative gearing tick off that servicing calculator for most investors it's over 200,000 difference.

[00:23:17]>> Yeah, but they'll still the new homes will still have the negative gearing.

[00:23:20]Yes, I I think that I think that will naturally guide them towards new property which I don't think is a bad thing for the Australian housing market.

[00:23:30]>> No, so great for the to increase the supply cuz there is a massive under supply. We we appreciate that. So as long as the investor can borrow that amount and be comfortable with that but also more importantly is they're not just buying it because of the negative gearing discount or benefits. They're buying strategically still because it's a good asset for long-term growth and that's where when we when we talk about the apartment space and the and the house and land space there's there's basically it's a it's a wild west in terms of good bad and ugly.

[00:24:07]And look let's be really honest. The reason a lot of investors don't go to new stock has nothing to do with tax and things like that. It has to do with the I guess the feeling of getting ripped off and where you get advice from and >> Yeah. all of that two-tiered marketing where people are paying well over what a property's worth because there's so many people getting paid along the way.

[00:24:28]>> Absolutely.

[00:24:30]has moved I think or a big reason it's moved investors to existing stock and the quality.

[00:24:35]Yeah, but but also and we're probably not seeing it as much now but we it's the it's the scarcity as well like looking at new green field estates and and we're probably going off on a bit of a tangent but >> Let's let's tangent. Let's go.

[00:24:49]We look at green field estates and you and you see for as far as the eye can can can view we're looking at land availability and how quickly that land gets soaked up. Um but but also then investor we're thinking, okay, can we Who's going to be our neighbor? Can we rent it out when it's built? How many more stages are to come in that particular build? Um the off-the-plan space is same. The air The air space is potentially unlimited in certain suburbs. So, how many's going to be built up around me? What's my future going to look like in 10 years time for the supply and demand in that particular area for that particular stock. So, it is much more of a strategic play and there's a lot of a lot more things out of your control versus buying existing where you're in a middle suburb, you're you're the area's been there and living and and functioning for 100 years. You know what you're up against. You know how many owner-occupiers there are on the street, etc. etc. So, I'm not saying we don't go and buy house and land or or off-the-plan apartments. I'm just saying proceed with caution and just have trustworthy people in your corner when you're developing strategy. Yeah. So, I I I talked about those I agree with you completely on that. And I think a lot of investors will have no choice other than to go to newer stock, which may which may or may not have a positive impact.

[00:26:06]We talked about that rentvester and we talked about that young family trying to buy an investment property. They're going to be directly impacted by these changes. I'll tell you somebody who I spoke to 2 weeks ago that's not going to be impacted by these changes. Let's have a break and we'll chat about that.

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[00:27:02]All right, who'd you have this secret conversation with? Oh, this is a sort of secret [clears throat] conversation.

[00:27:06]Just a client I was speaking to. They were doing some things with their own occupied property. [music] They've got a super fund with $10 million worth of property in it.

[00:27:13]>> Holy strike. Now, I thought about them during this budget.

[00:27:16]>> Yes. And you know who's not getting impacted by this?

[00:27:19]>> Them.

[00:27:19]>> Them. Yeah. Because there was no changes to super. Not that I think there should or shouldn't be. I'm just saying that client with $10 million in property in super is certainly not losing any sleep over last night's budget. Yeah. No, and that's a great call. If you want to If If you wake up this morning saying how can I I suppose um work to the advantage of what the budget delivered last night, you're going to buy an investment property in the property space, I mean. You're going to buy You're going to buy an investment property in your self-managed super where you can still um claim uh 15% tax rate cuz SMSF is not uh involved in this change.

[00:28:01]>> not, and that's an important thing to note.

[00:28:03]>> Massive, because we're then paying 15% capital gains tax and then zero capital gains tax in retirement.

[00:28:10]All right? Now, obviously we know the restrictions around buying in your SMSF.

[00:28:13]Uh however, that's a big one from a capital gains perspective, but also the negative gearing aspect um is still there. And And a lot of SMSF property that's being purchased over the journey has been new. So, Mhm. you can sort of get the best of both worlds. Um That's right. I I I do think that a lot of people will go into different structures. I do think this does make something like a a company structure more appealing to a more sophisticated investor. Yeah. Yeah, so I think on that, it's super super important, and it always has been, but it's even more important now that you get really solid people around you in terms of your accountant, in terms of your mortgage broker, obviously in the property space.

[00:28:57]So, the those three people have never been more important. When we talked about winners and losers, the losers, I feel today, are the accountants that are going to be getting absolutely bombarded with >> to get a lot of business, potentially, but yeah, they're going to be asking a lot of questions. So, I I I spoke to one accountant this morning, and they're they're doing the same thing. They're they're putting it out on a podcast today to as well.

[00:29:19]Sorry, not a podcast, a webinar just to avoid all those one-off phone calls.

[00:29:24]>> There's there's going to be there's going to be so many questions, and and we don't know the answers. We certainly don't. This hasn't been legislated yet.

[00:29:30]We're just talking about what they're proposing.

[00:29:32]It probably will be, but it's just it hasn't been legislated. And then we also need to see the fallout of what the banks actually do, and and how behavior changes.

[00:29:40]>> Yeah. Yeah. No, absolutely. Yeah, it's it's interesting times, and I think yeah, getting onto the emotional side of things, like and I've only seen a little bit of commentary, and I'll answer a few of the listener questions from our Facebook group in a minute, but I I think it's very common to wake up, and you're at least sitting here listening to this with some feelings of some kind. It might be deflation, and thinking, "Geez, my back's against the wall."

[00:30:10]Or, "I was going to do this, but now I'm questioning it." Like I've got emails after emails in my inbox saying, "Can we chat? Can we chat? Can we chat?" sort of thing.

[00:30:17]>> I haven't looked at mine yet.

[00:30:18]>> [laughter] >> Um so, I think that's the best part for anyone's listening in to say, "Where to from here?" You need to be speaking to your team of people saying, "Right, how does this impact me?" Don't look at the the high-level media saying it's disastrous for first home buyers, or it's disastrous for this person or that person or whatever.

[00:30:39]I I it's it's still about you and your situation and saying, "Right, do I want to create wealth for my family? Do I want a roof over my head?

[00:30:48]Has that conceptually changed? No. Have the goalposts changed in terms of what I can and can't do when I buy them? Yes.

[00:30:55]Uh so, it's just about pivoting and and rolling with the punches essentially.

[00:31:00]100% and I I am so passionate about first home buyers being able to get into the market. And if this helps them do that, if this slows the property market to a point where people can get in, I'm all for it and I hope it has that positive effect. But while we're there, why don't we go I'm just going to jump on to the Australian property chat.

[00:31:16]There were some questions there last night. This is a really long um post, but I want to read it because it's you know, somebody's actually woken up this morning and shared their thoughts and I just want to share this. So, somebody's written, "As a young Australian who has worked incredibly hard to save for a deposit for an investment property, I honestly feel defeated after la- last night's budget announcements. I work roughly 60 hours a week trying to get ahead financially and finally reached a point where I had a deposit saved, pre-approval ready, and had actively begun searching for an investment property around the $700,000 mark. My plan was to buy within the next few weeks. What makes this feel so devastating is that I was essentially too late overnight.

[00:31:56]There was no real warning period for people in the process, no transition time. It genuinely feels as if I had managed to secure a property literally days earlier, I'd be in a completely different position than I am today.

[00:32:08]From my calculations, I've effectively lost around $10,000 a year in tax benefits overnight. That's not a small number for someone trying to break into the market. My entire strategy was based around rentvesting because realistically, I love my job and my life in Sydney, but my income still doesn't allow me to do comfortably to comfortably buy a home yet.

[00:32:28]My goal was to buy an investment somewhere more affordable, benefit from long-term capital growth, and eventually use that equity to hopefully afford a home in Sydney later in life. Now I feel like I've taken 10 steps backwards.

[00:32:41]Without being able to utilize negative gearing in the same way, I'm now looking at significantly larger yearly holding losses and trying to determine whether the long-term growth everyone talks about will actually outweigh the additional risk and cash flow pressure.

[00:32:54]And I think what's hardest is the uncertainty. I understand property investing has never been risk-free, but I was finally at the point where I felt close to to building a future for myself and overnight changed dramatically. Now feels like young Australians who are actively trying to get ahead and were literally on the edge of buying have been hit the hardest. So my questions are, and we'll answer these, does investing still stack up without negative gearing? At what point do the yearly losses outweigh the potential capital growth? Is rentvesting still a smart pathway into the Sydney market or has the risk profile now changed too much? And what would you honestly do if you were a young Australian buyer sitting in the exact position today?

[00:33:35]Because right now, I don't feel excited anymore. I just feel defeated. Oh. Well, that's an emotional post, isn't it?

[00:33:42]>> That's really I just think I just breaks my heart, really.

[00:33:46]>> yeah. Yeah.

[00:33:47]Um yeah, and this they're not going to be on their own. There's going to be a lot of people thinking that for sure.

[00:33:55]Um so look, Sydney's probably well, not probably, it is the hardest market to get into. All right, and we're talking to the old gray fox earlier this morning, Vince Scully, and and he said, "Look, people need to pivot from this. They might not be living in Sydney anymore."

[00:34:13]Yeah.

[00:34:14]>> and I think that's where we need to understand that that things change over time and affordability changes and what we could have done 30 years ago or 10 years ago or yesterday, we we no longer can do. So I think it's it's pivoting and that's easier said than done, but I think it's just what's the new way forward for me and how do I adjust to this? So, good news is um hopefully you've got your health and you're earning an income and we've got to look at the the positives of that.

[00:34:42]Does investing still stack up without negative gearing? Yes, I think there is because I think it does because Australian real estate is is an unbelievable asset um which you get into.

[00:34:52]Is it as attractive as it was yesterday?

[00:34:55]Mm, maybe not, but the growth I don't think changes so much. The tax benefit's obviously different. The yearly losses outweigh the potential capital growth.

[00:35:04]Well, I mean if we're losing when when we look at 10 grand a year, if you're over a 10-year period, the key question is can I hold that? Can I handle that 10K loss, right? And if I can, as long as I'm getting more than a 10K gain, right? I'm moving forward for and in terms of my wealth creation, right? So, when you look at that percentage on that property purchase, um it's it's only requires a a reasonable average amount of growth for me to be benefiting from that, right? Versus just simply doing nothing, okay?

[00:35:37]Is rentvesting a a smart pathway into the Sydney market or is the risk profile now changed too much? Look, rentvesting is one option. Um free vesting is another which might not apply to everyone, uh but what's the alternative? Like, do I do I move out of Sydney and go to another regional area and earn 30 grand less, but still have a a better chance of buying an asset? Yeah, well, I live on the Central Coast which is in, you know, over an hour out of Sydney because my father, who was a baker, on his wage in the early '80s couldn't afford Sydney. Yeah. Which is why we live on the Central Coast.

[00:36:12]>> Yeah. There you go. And my first property was in regional New South Wales because I couldn't afford here. Yeah.

[00:36:18]So, I I do believe in generations we're going to be going further out and Sydney may not be affordable and that's a really hard It is hard to take that.

[00:36:26]Rach, this part of it made me think, right, what would you honestly do if you're a young Australian buying sitting in this exact position today? What would you do?

[00:36:36]I am and I have always been an optimist.

[00:36:39]So, I would go what is in my control, what can I do, and I would take action on that. Banks are going to change their servicing calculators with time, but the real obviously there's there's there's changes to negative gearing. I would still I still think getting into the Australian property market early matters.

[00:36:56]>> Yeah. Time in the market.

[00:36:58]Yeah, I would be 100% the same. It's like what's what's the version look like for me? And I was talking to my father last night who was an investor in the late 90s when they made changes to negative gearing and he said, "Yeah, they changed it and then they changed it back." So, I think uh it just reminded me that things change and they change back. Don't let them change your strategy. No, and don't let them change your mindset. Like um Anonymous mentioned like I don't feel excited anymore.

[00:37:28]I don't want to sound harsh, but excitement's a choice. It's like okay, I can get excited about anything. I can get excited about >> Oh, no, I feel I'm heartbroken for that person.

[00:37:36]>> I know, I'm I am, too. But like it's who does it come back to? It comes back to our us as an individual and saying what can I control? Government's done this, right, I need to react for what I can control, not damn you government or Yeah, absolutely. And it is it is easy and I can't obviously I've had a chat to my team this morning and everyone was sounding pretty negative. But it's >> [laughter] >> And no one likes change.

[00:38:02]>> No one likes change and you know, all the people that talking about all the people that they're dealing with every day that are actually going to lose from this.

[00:38:08]But you've just got to look at what is in our control and do our absolute best with it.

[00:38:12]>> Yeah, absolutely. And and yeah, I think keep pushing forward with with with your property journey is is uh way forward for me, but it it's just going to be a different version today.

[00:38:25]That's all. It will be. And there will be there will be a way for you to get into the property market. We just need to find it. And who knows what stimulus packages they'll bring in to help first home buyers in the market.

[00:38:36]>> Yeah, absolutely. JM Kelly says, "Curious John of the impact if we turn our existing PPOR into an investment in 2 years time, buy a new PPOR, how will the property before the announcement for personal use be assessed for negative gearing capital gains tax when it becomes an investment?" Well, I'm not um high enough up the tree, but I would assume that because you purchased it before last night. Yeah, and they haven't released anything on that, but my brain says that they should it should go on the contract. If they're going to put a line in the sand and say from this date the rules have changed, it should be it should be purchase date, not regardless of the usual the the usage at the time.

[00:39:19]>> Yeah, I would think that too, but that's obviously yeah, we're we're hot off the press in the morning after the budget, so we just need to you just need to check that once the the devil is in the detail.

[00:39:29]>> going to put this up same day with no editing, so I hope everything works out.

[00:39:33]>> [laughter] >> Yeah.

[00:39:34]Um Bright Parrot would you be interested to sorry, would be interested to hear your thoughts on how these changes might impact the rent investing approach. Will it be a big deterrent for people or not have much of an effect? The big one's cash flow for me. Like if you can afford to handle the costs. And when we're doing strategy with clients, we're saying, "Right, can we handle this amount before tax?"

[00:39:56]They're not relying on the tax return.

[00:39:58]The tax return becomes a bonus, but conceptually you can still handle that before tax. That's that's the big one.

[00:40:04]So, I think yes, um it's definitely still got a place and because generally a lot of Australians want to rent or want to live where they probably can't afford right now. So, I I think uh I think that will still continue. Again, just a different version of that Um and maybe interesting to see smaller regional centers where you can get in for 300,000 they all of a sudden on the horizon and yeah, the implications of potentially something like that. But something that they have said everyone agrees on is that it will slow the property market growth. Yeah. So everyone everyone that I've listened to has agreed with that.

[00:40:43]I haven't heard anybody say anything different. So if we're talking about the winners, first home buyers who aren't in the market yet would have to still be the winners because they've got more chance to get into the property market if investors are slowing and everything we've said on this podcast talking about how it's going to impact investors. Is it going to slow them? I would say it is. Yeah, slow but not stall or retract.

[00:41:06]>> but that I think it will slow them. I do think first home buyers should be winners. I think I think there's things I would have done differently. I think more stimulus packages and there's there's nothing to talk about supply or how they're going to make building easier. But if people do build rather than buy existing stock and it slows the market, it should help first home buyers. Yeah. Speaking of stimulus, Mark Boris spoke this morning.

[00:41:29]Um What did he say?

[00:41:30]>> He's he was he said look the government have stuffed this up blah blah blah.

[00:41:34]It's not going to do anything. It's going to make it harder for first home buyers etc. Um And and he was just talking about different options right that could be available.

[00:41:45]He's a thinking out the side out the out of the square type of guy.

[00:41:49]Said well imagine if we if a young Australians you could get a rebate on your rent that you're paying. So if you're in your 20s for example and you pay $600 a week in rent, come tax tax time, you can get some sort of rebate or tax return on your rent that you're paying. So like negative gearing works for previous investors, make it and come off your taxable income your rent. They'll they'll never do that. No, I know, but what a [laughter] what a great thought. Like to stimulate those in their 20s to be able to get themselves more cash in their life to put down deposits to buy their home to get a start. Because that's the problem. It's the start. Getting the deposit together and getting in.

[00:42:27]Although with the last couple of rate rises and now this borrowing capacity is definitely slowing. Yeah, and that's what we need to to see in the coming weeks, Sammy. What the banks how the banks are reacting to this. So you'll you'll be no doubt on top of that and we'll we'll put it in the in the group as well just to to keep everyone informed and you might give some examples. Yes. So I guess so just I guess that so the winners I think the winners are going to be first home buyers.

[00:42:56]Um people purchasing new builds. Yeah.

[00:42:59]Um developers and construction if if if it has the positive effect that people think it will have.

[00:43:05]I think the losers will be highly leveraged property investors. Mhm.

[00:43:10]New investors, rent vesters, or potential rent vesters. And I think the big picture takeaway for me is that we're not have we've had in no way talked about the the problem of supply and property. No.

[00:43:24]We still have the same issues we had yesterday. Correct. And that that won't change in the short term and I'm I'm doubtful it changes in the long term, I 10 years. Like I just think we're just playing catch up and everyone wants to come and live in Australia and we just haven't got enough stock. So that only spells one thing for me, that's growth in the property markets. Um So you think growth in the property market?

[00:43:45]>> Yeah, but not all, cuz we can already see and and when we're going to be careful of head headlines, right? People are saying that the the media is saying Sydney and Melbourne prices are dropping.

[00:43:58]Yes, they are above 2 million.

[00:44:01]Sub 1 million in Melbourne is going crazy. 30 40 people at open homes, etc. That that's that's the market that's growing at the moment in Melbourne. But all you see is a headline Melbourne and Sydney are forecast to drop by 6% this year.

[00:44:15]>> Yeah.

[00:44:16]Uh at 2 million or 3 million, absolutely it probably will. Um and and but yeah, the the uh the fundamentals haven't changed from last night to today, have they? All right, anything else to to round this out, Rach? Yeah, but if I think the rent vesting approach will change, yes, I think it absolutely will.

[00:44:32]That was just one of the questions that you asked that I didn't answer. But I do think there will be a change to rent vesting directly linked to this budget.

[00:44:38]>> Okay, so how do you think that will change for people conceptually? Well, I think people may go into other things to invest rather than rent vesting if they if it doesn't work for them. Yeah, okay.

[00:44:47]So, I'm a property person and I'm um I'm just devil's advocate here. I'm a property advocate. I love it. That's all I know. I don't I'm I'm not interested in shares, ETFs.

[00:44:57]Oh, not for property people, but I think for somebody looking to get their deposit together Okay. to buy a house to live in where before they may have rent vested, I think with the new numbers some people may go into other things to get their deposit.

[00:45:09]Yeah, okay. So, invest their money elsewhere to get the as opposed to buying an investment property first?

[00:45:15]>> They opposed to doing a rent vest with the goal of buying their own home so they can have a big enough deposit to get in. I think they may go into different things. So, I do think there will be some changes to the way people treat rent vesting directly linked to this budget.

[00:45:28]>> Yeah. But we will have to wait and see.

[00:45:29]We'll have to wait and see. Hey, thinking more about this, what would what would we do back? Yes. Like I'm I'm moving to and and of course this is different if we're a a sheep shearer versus a an accountant or a lawyer or I don't know, someone in IT, but I would believe I would be moving and this is short-term pain, long-term gain. I'm moving to the cheapest region I can to still keep my job and and most of my income to save maximum amount of dollars to get myself into property sooner and then move back to where I would love to live to to rent. Um like I've just got to pull out all stops and just maximize my savings right now. 100% Well, I did move to regional New South Wales to buy my first home because I was on a single income and could not afford back then. And and I'm sure you probably didn't want to do that. That was not having my first choice.

[00:46:21]>> Yeah, I know. But I do think people if if I was in that that age again right now, I would absolutely be moving to a place I could afford a property. I would not allow my lifestyle to stop me getting into the Australian property market because I think not entering the market will have long-term negative effects on your financial future. Yeah.

[00:46:39]And and once you're in, you're in.

[00:46:41]That's right. So, I would hate for this budget to deter anyone getting into the Australian property market and I hope for first home buyers that aren't maybe investors, I hope this actually really encourages them and makes them feel like this is our opportunity to get in. Yeah, absolutely.

[00:46:55]All right. Well, uh thanks for tuning in. Hopefully you've found some of this beneficial maybe some half some inspiration, half some I don't know. Um yeah, maybe something to think about, something to ponder on.

[00:47:07]Um but yeah, again, reach out to either of us should you want to talk either property or lending because it's an important time to have uh people around you that yeah, suppose have been there and done that before before you. And we will do a follow-up episode in a few months time and just talk about how it's impacting real people in real time. I think that I think time will tell. Time will tell. I've been John, you've been Rachel, and this is property.

[00:47:35]If you're looking to buy your first home, you need a strategy. Whether you're buying to live in or for an investment, my book, The Quick Start Guide to Your First Property, is for you. And if you're serious about building your investment portfolio, I've got a book for you, Sort Your Property Out and Build Your Future. Both our books are available wherever good books are sold.

[00:48:02]>> Mhm.