Negative Gearing Changes Could Push Melbourne Rents Up 20% — What Property Investors Need to Know

Negative Gearing Changes Could Push Melbourne Rents Up 20% — What Property Investors Need to Know

New analysis suggests that the federal government's proposed negative gearing and capital gains tax (CGT) changes could trigger a rental price surge of up to 20% in Melbourne, as landlords reassess the economics of holding investment properties.

The Policy Background

The federal government's housing reform package, which passed the lower house earlier this year, includes modifications to negative gearing and a reduction in the CGT discount for investment properties held beyond 12 months. While the reforms were intended to improve housing affordability by shifting supply incentives, independent analysts and property researchers warn the short-term impact on the rental market could be severe.

Why Melbourne Is Most Exposed

Melbourne's rental market is particularly vulnerable for several reasons:

• Investor concentration: Melbourne has a higher proportion of investor-owned rental properties compared to the national average, particularly in inner suburbs.
• High holding costs: Melbourne landlords already face some of the highest land taxes in the country, combined with elevated interest rates on investment loans.
• Weak rental vacancy: The current rental vacancy rate in Greater Melbourne sits below 2%, meaning there is minimal buffer if investor supply exits the market.

According to analysis cited by Australian Broker, if even 5–10% of Melbourne investors exit the rental market in response to the tax changes, rental prices could increase by 15–20% within 12–24 months.

Implications for Property Investors

For investors holding Melbourne residential or commercial property, the reform timeline creates both risk and opportunity:

Short-term pressure: Investors who purchased near peak prices and are already under cash flow pressure may accelerate plans to sell, creating market softness in some segments.

Bridging finance demand: Investors needing to restructure portfolios — selling one property while acquiring another, or freeing up equity — are increasingly turning to bridging loans and short-term private funding rather than waiting for standard bank approvals.

Non-bank commercial loans: For landlords pivoting toward commercial property, which retains more favourable tax treatment, non-bank commercial lenders can offer faster approvals and more flexible LVR structures than the major banks.

What MPFG Capital Sees

At MPFG Capital, we have seen increased enquiry from property investors looking to refinance, restructure or bridge their portfolios ahead of the tax changes taking effect. Whether you are looking to hold, sell or pivot to commercial, a tailored finance solution can make the difference between a reactive and a strategic outcome.

This article is general information only and does not constitute investment or tax advice. Consult a qualified adviser before making property or finance decisions.