What the May 2026 negative gearing and capital gains changes actually do, and why rents across Gawler, the northern suburbs, the Mid North and the Barossa keep climbing.
By the team at Harcourts Gawler Property Management
There is a gap between what the Federal Government legislated in May and what the market decided it meant. Renters in our patch are paying for that gap right now.
From inside the industry, it does not look like the entire real estate ecosystem was considered before these two tax components of the residential investment market were changed. The intent was to help first home buyers into the market. The immediate effect, at least in the northern and Mid North corridors we manage every day, has been fewer rentals available and more people competing for each one.
What actually changed on 12 May
It is worth being precise, because a lot of the panic has been built on a version of these rules that does not exist.
Negative gearing. From 1 July 2027, negative gearing on residential property will be limited to new builds. A new build means a dwelling built on vacant land, or a replacement that increases the number of homes on the site. A knock down and rebuild that does not add supply does not qualify.
Grandfathering. Any residential property held at 12 May 2026 is exempt from the restrictions. If you already owned your investment property on budget night, your negative gearing position has not changed.
Capital gains tax. The 50 per cent CGT discount for individuals, trusts and partnerships is being replaced with cost base indexation plus a 30 per cent minimum tax rate on capital gains. This applies only to gains accruing after 1 July 2027, with apportionment where a holding straddles both regimes.
Read that grandfathering clause again, because it is the single most misunderstood line in the budget.
The knee-jerk reaction
Despite the grandfathering, we have seen existing landlords list investment properties for sale since May. Not because their tax position changed, but because they were unsettled by the idea that it might, and by the uncertainty about where the market goes next.
The data backs up what we are seeing at the coalface. New investor loan commitments fell 8.6 per cent in the June quarter, a drop of about $4.2 billion, the largest quarterly fall since 2015. Property Investment Professionals of Australia has warned the investor retreat will add to existing rental market strain.
Every one of those sales has a tenant attached to it. When an investment property is sold to an owner occupier, a rental home leaves the pool permanently. That household then re-enters a market where there is almost nothing available, and pushes the queue at every open inspection along by one.
Treasury modelled a temporary rent increase of around $2 a week from these measures. In a market with a vacancy rate under one per cent, the reaction to the policy is doing considerably more work than the policy itself.
The lending squeeze nobody planned for
There is a second-order effect that has had less attention. The major banks have already rewritten their serviceability rules. Negative gearing is now only factored into investor loan assessments for new builds or for properties purchased on or before 12 May 2026. Commonwealth Bank confirmed the change publicly and the rest of the big four have followed.
The practical result is that investor borrowing capacity has been cut. Credit policy has tightened across the board, and tighter credit does not neatly confine itself to investors. First home buyers are finding the goalposts have moved too, even in a market with fewer investors bidding against them.
Meanwhile the sales market has cooled. Fewer buyers are walking through open homes. The rental market has not cooled at all.
What this looks like on the ground
Greater Adelaide. The vacancy rate sat at 0.6 per cent in July 2026, down from 0.7 per cent in June, against a national figure of 1.3 per cent. A balanced market sits somewhere between three and four per cent. Adelaide’s median weekly rent has reached a record $600, up 3.4 per cent over the year. Regional South Australia has climbed faster again, up 7.5 per cent to a $430 median.
That regional number matters. The traditional strategy of moving further out to find value is losing its effectiveness, because the outer and regional pockets are now growing faster than the metro area they were an escape from.
The northern growth corridor. Playford suburbs including Elizabeth, Smithfield and Davoren Park are producing gross yields near 5.9 per cent, with re-let increases commonly landing in the 8 to 12 per cent range. Extreme affordability relative to the rest of Adelaide, combined with very low stock, keeps competition fierce.
Salisbury North and Paralowie continue to draw steady tenant demand off the back of ongoing development and family-friendly expansion.
Angle Vale and Virginia are absorbing significant population growth through master-planned community extensions, with the Riverlea project the most visible example. New housing is arriving, but households are arriving faster.
The Barossa and Mid North. Demand continues to outpace supply across the Barossa Council region. In our own management portfolio, vacancy in the key hubs remains well under one per cent, house rents are typically sitting in the low $500s per week, and Tanunda continues to run above the regional average. Gross yields across the region are tracking in the high threes to low fours. Regional lifestyle markets like the Barossa have largely bucked the softening seen elsewhere in the country.
What this means if you own an investment property
If you owned your property on 12 May 2026, your negative gearing entitlement is intact. Selling out of caution rather than strategy is the most expensive decision available to you right now, and in a sub one per cent vacancy market it is also the least necessary. Rents are firm, tenant quality is high, and arrears risk is manageable with good management.
If you are buying, the calculus has genuinely changed and new builds now sit in a different tax position to established stock. That is a conversation worth having with your accountant before you have it with an agent.
If you are holding, the question is not whether to exit. It is whether your property is currently rented at market, whether your maintenance and compliance are in order, and whether your rent reviews are actually being done on time. In a market this tight, the gap between a well managed property and an averagely managed one is measured in thousands of dollars a year.
What this means if you are renting
Competition is unusually fierce and it is not easing this year. Applications that are complete, verified and submitted quickly win properties. We would rather tell you that plainly than let you learn it after the fifth unsuccessful application.
Talk to us about your property
Whether you are weighing up whether to hold or sell, wondering if your property is rented at market, or looking for a property manager who tells you what is actually happening rather than what you want to hear, we are happy to have the conversation.
Harcourts Gawler Property Management looks after landlords and tenants across Gawler, the northern suburbs, the Barossa and the Mid North.
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