Is Australian Investor Activity Set to Fall? What Property Investors Need to Know About Finance

A Turning Point for Property Investors?

Property data group CoreLogic has raised a significant question for Australia's investment market: is investor activity set to fall? The query comes in the wake of the Federal Budget 2026-27, which introduced changes to negative gearing and capital gains tax (CGT) discounts that analysts say have materially shifted the financial calculus for residential property investors.

According to CoreLogic's May 2026 research, several converging factors are creating headwinds for investor participation:

• Budget tax reforms: Labor's overhaul of negative gearing and CGT discounts has prompted lenders including Macquarie to remove add-backs from serviceability calculations
• High cash rates: At 4.35%, investment loan rates remain elevated, compressing rental yields and cash flow
• Tighter serviceability: APRA-regulated banks are applying conservative buffers that reduce maximum borrowing capacity
• Rising holding costs: Insurance, council rates, and maintenance costs have outpaced rental income growth in many markets

What the Data Shows

CoreLlogic's May 2026 Monthly Housing Chart Pack reveals that while home values have eased in Sydney and Melbourne, regional markets continue to outperform. This divergence has implications for investors weighing capital growth versus yield:

The Non-Bank Advantage for Investors

For investors who are finding major bank serviceability calculations increasingly restrictive — particularly following the removal of negative gearing add-backs — non-bank lenders offer a meaningful alternative.

MPFG Capital's investment loan products assess applications on a broader set of criteria:

• Rental income: Full rental income recognised in serviceability calculations
• Alt Doc options: Self-employed investors can use BAS statements or accountant letters
• Commercial property: Investment in commercial properties assessed separately from residential serviceability rules
• LVR flexibility: Investment loans available up to competitive LVR levels

For investors with portfolio complexity — multiple properties, mixed income sources, or business ownership — a non-bank lender's case-by-case assessment can unlock financing that major banks decline.

Strategic Considerations for Property Investors in 2026

Given the current environment, investors should consider:

1. Reassess serviceability under new rules: With negative gearing add-backs removed at some lenders, your actual borrowing capacity may have changed.
2. Model cash flow at current rates: At 4.35% cash rate, ensure your investment property cash flows positively or break-even under realistic projections.
3. Consider commercial property: Commercial property loans are less affected by residential serviceability changes and may offer higher yields.
4. Explore non-bank financing: If your bank has reduced your approved amount post-budget, a non-bank lender may offer an alternative assessment.

This article is for informational purposes only and does not constitute financial or investment advice. Property investment involves risk. Always seek independent advice before making investment decisions.