Daniel Butkovich, Property Journalist
First published 12 Oct 2026, 12:01am
A changing market has reset the playing field for investors, with focus shifting to the areas and types of properties that stand to benefit most from new tax settings.
While overall investor demand has cooled this year following interest rate rises and tax changes, many investors are now flocking towards new homes and high-yielding rental properties, according to the latest PropTrack Terri Scheer Investor Report.
The report, which analysed the evolving investor landscape and how market conditions have shifted in the past year, found that investors have pulled back more than owner-occupiers recently.
This followed a period in which the share of investor loans was at or near record highs in many parts of the country.
But according to report author and realesate.com.au senior economist Angus Moore , not all investors are exiting the market, and many are changing their tactics in response to the tax changes introduced in the federal budget this year.
Source: PropTrack Terri Scheer Investor Report 2026
The controversial changes replaced the 50% capital gains tax discount with inflation indexation and applied a minimum 30% tax rate on capital gains.
Negative gearing was abolished for established properties, meaning investors can no longer offset rental losses against salary, but can continue to offset losses against future rental income or capital gains.
Outer suburbs of the capitals, where rental yields tend to be higher, have proven popular with investors. Picture: Getty
“The budget changes – which have the effect of making low-yielding, loss-making investment properties less attractive – have seen investor demand shift towards higher-yielding rental properties,” Mr Moore said.
“These investments are more likely to provide positive cash flow, rather than relying on home price growth.”
The report found that a greater share of investors have been enquiring about properties with higher rental yields than before the budget, while the share of investors enquiring about lower-yielding properties has decreased.
“Prior to the budget, yield may not have been as high of a priority for investors as capital growth prospects – particularly for the high-income, working age investor – with the ability to deduct investment losses an attractive mechanism to reduce taxable income,” Mr Moore said.
“Post-budget, that labour income deduction mechanism will no longer be available for established residential properties.”
Source: PropTrack Terri Scheer Investor Report 2026
The report found that gross rental yields – the income derived from an investment property relative to its price – have increased at the national level as home prices softened and rents rose.
While yields have ticked up across the capitals this year, Sydney and Melbourne, which have historically had lower rental yields than the other capitals, have recorded a notable increase in yields in the past few years as price growth slowed and rents rose.
Rental yields have risen in Melbourne and Sydney in recent years as home price growth slows and rents rise. Picture: Getty
Melbourne’s median rental yield is almost 4% while Sydney’s is about 3.5%, having risen from sub-3% lows in 2022.
Home prices in Sydney and Melbourne have declined by about 5.5% since reaching a peak late last year.
Source: PropTrack Terri Scheer Investor Report 2026
On the other hand, yields in Brisbane, Perth and Adelaide have trended down over the past few years as a result of the big run-up in home prices in these cities.
Mr Moore said the tax changes in the budget would likely lead to investors demanding higher yields as holding loss-making, low-yielding rental properties becomes less attractive.
Importantly, new homes were excluded from negative gearing changes in the budget in a bid to increase housing supply – a move that has also influenced investor behaviour.
“Investor demand also appears to have shifted towards new homes, which are carved out from the budget changes,” Mr Moore said.
Source: PropTrack Terri Scheer Investor Report 2026
Lending data from the ABS shows the overall number of loans to investors declined by 9% in the June quarter, but investor loans for buying or building new homes increased by 24%.
There has been an increase in the share of investors buying new homes since tax changes were introduced in the federal budget. Picture: Getty
“We saw a notable jump in the share of investor loans going to new homes in the June quarter,” Mr Moore said. “This is a deliberate outcome of the budget changes.”
The report found that 91% of properties sold by investors in the three months to the end of July 2026 were sold for more than the purchase price – a small decline from the 93% share recorded earlier in 2026 when home prices peaked.
Source: PropTrack Terri Scheer Investor Report 2026
“The overall high share reflects the fact that most parts of the country have seen strong price growth in recent years,” Mr Moore said.
“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.”
An estimated 98% of investor sales in Perth this year were profitable. Picture: Getty
Melbourne remained the outlier among the capitals, with 85% of investment properties sold for a profit – a result of slower price growth than other cities in recent years.
Source: PropTrack Terri Scheer Investor Report 2026
Softness in home prices is expected to continue through the rest of 2026 as the cumulative effects of four rate rises continues to weigh on borrowing capacities, Mr Moore said.
“With the expectation that interest rates are likely to increase again this year, home prices aren’t likely to return to growth until 2027.”
Help us improve your reading experience
Got a minute? Your feedback will help us build a better experience for you.
