Negative Gearing Changes: Mortgage Brokers Explain Why Investors Aren’t Panicking

Negative gearing has returned to the centre of Australia’s housing debate ahead of the May 2026 Federal Budget, with policymakers considering reforms such as a two-property cap, restricting the benefit to new builds, or ringfencing property losses.

But while headlines suggest investors should be worried, mortgage brokers working directly with property investors say the reaction on the ground has been far calmer.

According to brokers from Home Loan Experts, most investors are not panicking about potential changes to negative gearing.

Instead, they continue to focus on long-term investment fundamentals such as capital growth, rental demand and portfolio strategy.

What Mortgage Brokers Are Hearing From Property Investors

Mortgage brokers say negative gearing reforms have become a frequent topic in conversations with investor clients, but the response is far from panic.

According to Senior Mortgage Broker Romy Dhungana, the level of concern depends largely on the type of investor.

“It’s definitely coming up more in conversations with investor clients, but I don’t see panic at this stage.”

He explains that experienced investors with larger portfolios are watching the policy debate closely but are not slowing down their plans.

“More experienced investors with three or four properties are paying close attention, but they’re not panicking or slowing down. I’m still doing a lot of investor loans.”Meanwhile, smaller investors tend to focus on more immediate issues.

“First-time or two-property investors are less worried about negative gearing changes. They’re more focused on borrowing capacity for their next purchase.”

Why Investors Don’t Rely On Negative Gearing Alone

One of the biggest misconceptions in the negative gearing debate is that tax deductions are the main reason people invest in property.

Mortgage brokers say this is rarely the case.

According to Dhungana, many investors initially misunderstand how the tax benefit works.

“A lot of investors have been sold the idea that any loss is a good loss because ‘the government pays for it.’ That’s not how the maths works.”

If an investor is in the 30% tax bracket, every dollar they lose only returns about 30 cents at tax time.

Even investors in the highest tax bracket still absorb most of the loss themselves.

“Most experienced investors understand that negative gearing alone doesn’t make an investment good. The real driver is long-term capital growth.”

Most Investors Plan To Move From Negative To Positive Gearing

For many investors, negative gearing is only a temporary stage.

According to Mortgage Broker Robert Mo, the long-term goal is to eventually generate positive cash flow.

“The end goal is to transition from negative gearing to neutral and then to positive gearing so the property eventually produces income.”

He says most investors are only slightly negatively geared.

“Most investors might only be negative by about $5,000 to $10,000 per year. On a 30% tax bracket, that’s only a $2,000 to $3,000 tax refund.”

Because of this, negative gearing rarely determines whether someone invests in property.

“Negative gearing helps, but it’s not the main driver.”

Have Negative Gearing Discussions Changed Investor Behaviour?

While policy discussions have increased media attention on negative gearing, broker insights suggest investor behaviour has been mixed rather than dramatic.

According to Dhungana, some investors are moving forward with purchases in case current rules are grandfathered.

Others are taking a wait-and-see approach.

“When these discussions hit the media, uncertainty alone can slow decision-making even if nothing has actually changed yet.”

Senior Mortgage Broker Vivienne Than says investor reactions also depend on the level of support they receive.

Clients working with buyer’s agents and professional advisers often remain confident and active in the market.

Meanwhile, investors making decisions alone may be more influenced by media coverage.

Who Could Be Most Affected If Negative Gearing Was Capped?

Dhungana says many investors who built portfolios gradually could face unexpected challenges.

“These aren’t big developers or professional investors. They’re teachers, nurses and tradies who followed common advice to buy a few investment properties over 10 or 15 years.”

If negative gearing were capped at two properties, it could affect the later properties in those portfolios.

“It’s usually the third or fourth property that could be affected, and that’s often the one people were relying on for retirement income.”

Could Negative Gearing Reforms Affect Rental Supply?

Another concern raised by brokers is the potential impact on the rental market.

According to Than, housing supply remains a key issue.

“The debate is often framed as investors versus first-home buyers, but the bigger issue is supply.”

If investor activity declines while housing supply remains limited, the rental market could tighten.

“If investor demand falls but housing supply doesn’t increase, you risk fewer rental properties, tighter vacancy rates and higher rents.”

---

What Negative Gearing Changes Are Being Considered?

The Albanese government is reportedly examining several possible reforms ahead of the 2026 Federal Budget.

These include:

• Two-property cap: Limiting negative gearing deductions to two investment properties.
• New-build restriction: Allowing negative gearing only on newly constructed homes.
• Ringfencing losses: Preventing rental losses from being deducted against salary income.

Most proposals are expected to include grandfathering, allowing existing investors to keep their current tax arrangements.

The Bottom Line: Investors Are Watching, Not Panicking

Despite renewed political debate around negative gearing, mortgage brokers say investor behaviour has remained relatively steady.

Many investors understand that negative gearing is simply one component of a broader investment strategy, rather than the main reason to buy property.

Long-term fundamentals such as population growth, housing demand and rental income potential continue to drive most investment decisions.

For now, brokers say the dominant response from investors isn’t panic. It’s simply keeping an eye on how the policy debate unfolds.

If you’re an investor weighing up your next purchase ahead of the federal budget, talking to a specialist mortgage broker is a good starting point. Our team of brokers have deep experience in investment lending and can model your borrowing capacity and walk through the scenarios with you. Call us 1300 889 743 or enquire online for free today.

Share this article

Previous Blog

How APRA’s New DTI Limit Affects Investors