The Federal Government’s 2026 / 2027 Budget has placed housing firmly at the centre of the national conversation.

From changes to negative gearing and capital gains tax (CGT), through to major commitments around housing supply and infrastructure, this year’s Budget signals a significant shift in how Australia approaches affordability, investment, and housing development moving forward.

For homeowners, investors, and owners corporations across NSW, these changes are likely to influence everything from property values and rental pressure through to construction activity, maintenance costs, and future housing supply.

At Strata Plus, we know that major policy changes can quickly become overwhelming, particularly when headlines focus on winners, losers, and market speculation. The reality is often more nuanced.

While many of the measures announced are still proposals and yet to be legislated, the broader direction of policy is becoming increasingly clear: the Government is attempting to encourage investment into new housing supply while easing pressure on existing housing stock.

For apartment owners and strata committees, many of these changes will influence not only property values and investment behaviour, but also future development activity, maintenance costs, and the long-term financial planning of buildings.

Housing Supply Is Now a National Economic Priority

One of the clearest themes of this year’s Budget is housing supply.

The Government announced a new $2 billion infrastructure fund aimed at unlocking housing developments by funding enabling infrastructure such as roads, utilities, and services required to support new communities. According to the Urban Development Institute of Australia (UDIA), Treasury estimates this could unlock approximately 65,000 homes, while industry estimates suggest the number could be significantly higher if states co-fund infrastructure gaps.

The Budget also links this funding to planning reform, with states and territories expected to accelerate zoning, approvals, and construction pathways.

For NSW homeowners, particularly those in strata communities, this is likely to mean:

  • Continued growth in apartment and medium-density developments
  • Increased pressure on councils and planning systems to approve projects faster
  • More focus on infrastructure delivery alongside urban growth
  • Ongoing density increases across established suburbs and growth corridors

At a high level, the Government’s position is that Australia cannot improve affordability without materially increasing housing supply.

However, while increasing supply sounds straightforward in principle, the challenge remains whether enough housing can actually be delivered quickly enough in the current construction environment.

Negative Gearing Changes: What They Mean in Practice

The biggest housing reform announced in the Budget relates to negative gearing.

From 1 July 2027, negative gearing for residential property investment will generally be limited to newly built dwellings that add to housing supply.

Importantly:

  • Existing investment properties purchased before 12 May 2026 will be grandfathered under current arrangements
  • Newly built properties will continue to qualify for negative gearing
  • Investors purchasing established properties after the changes take effect will no longer be able to immediately deduct rental losses against their salary or other income

Instead, those losses will be carried forward and used against future investment income or capital gains.

The intention behind the reform is clear: shift investor demand away from existing housing stock and toward new construction.

What This Could Mean for NSW Property Markets

Economic modelling from Commonwealth Bank suggests the combined housing tax reforms could result in dwelling prices being around 3% lower than they otherwise would have been.

The impact is expected to be most noticeable in investor-heavy markets, including:

  • Apartments
  • Townhouses
  • Lower-priced established dwellings

These are often the same property types commonly found across strata communities throughout Sydney and NSW growth areas.

For first-home buyers, reduced investor competition may modestly improve affordability over time. However, experts also expect many existing investors to hold properties longer to preserve favourable tax arrangements, which may reduce the number of properties coming onto the market.

For owners corporations, this may mean:

  • More long-term investor ownership within schemes
  • Slower turnover of lots in some buildings
  • Continued pressure on rental demand in well-located apartment markets

Capital Gains Tax (CGT) Is Also Changing

The Budget also announced significant changes to the CGT discount system.

From 1 July 2027:

  • The current 50% CGT discount for investment properties will be replaced with an indexation model and a minimum 30% tax rate
  • Existing investments will retain current arrangements until July 2027 through transitional grandfathering provisions
  • New builds will retain access to more favourable CGT treatment options

The new model changes how investment gains are taxed by adjusting gains for inflation rather than applying a flat discount.

In practice, the outcome will depend heavily on:

  • how long the asset is held,
  • inflation levels over that period,
  • and how strongly the property increases in value above inflation.

For many homeowners who are not property investors, these changes may have limited direct impact. However, for investors, the after-tax return profile of property investment changes considerably.

Perpetual notes that these reforms may alter how investors approach long-term wealth planning, retirement strategies, and investment structures.

Again, the Government’s broader objective appears to be steering investment toward newly constructed housing rather than established homes.

Not All “New Builds” Will Qualify

An important detail often missed in headlines is the definition of a “new build”.

According to Perpetual’s analysis, the negative gearing exemptions will apply to properties that genuinely add to housing supply, including:

  • newly constructed dwellings on vacant land, or
  • projects where existing dwellings are replaced with a greater number of homes.

However:

  • knock-down rebuilds that do not increase dwelling numbers, and
  • substantial renovations that do not add supply

will generally not qualify.

This distinction is particularly relevant in NSW, where redevelopment, infill housing, and apartment renewal projects are becoming increasingly common.

What About Rental Prices?

One of the biggest concerns surrounding the Budget is whether discouraging investment in existing housing could place upward pressure on rents.

Both economists and industry groups have acknowledged this risk, particularly if new housing supply cannot be delivered quickly enough.

However, Commonwealth Bank analysis suggests the immediate rental impact is likely to be relatively modest, estimating rental increases of approximately $2 per week on median rents.

The longer-term outcome will depend largely on whether housing construction meaningfully increases.

For strata communities, this reinforces the importance of maintaining existing housing stock to a high standard. In tighter rental markets, buildings that are well-maintained, financially stable, and proactively managed are likely to remain more attractive to both renters and owners alike.

Construction Costs and Building Pressures Remain a Major Challenge

While the Budget strongly focuses on increasing housing supply, the construction sector continues to face significant economic pressure.

The Budget acknowledges ongoing global supply chain disruptions and increasing material costs, including rising prices linked to fuel, plastics, and PVC-related products.

For owners corporations across NSW, these pressures are already being felt through:

  • increasing maintenance costs,
  • rising contractor pricing,
  • remediation project escalation,
  • insurance cost increases,
  • and longer lead times for repairs and upgrades.

This is one of the most important practical considerations for strata communities.

Even if broader housing policy succeeds in increasing supply over time, many buildings will still face rising operational and maintenance costs in the near term.

That makes long-term financial planning increasingly critical, particularly around:

  • capital works funds,
  • preventative maintenance,
  • remediation planning,
  • and forecasting future repair expenditure.

Faster Planning and Environmental Approvals

The Budget also includes funding aimed at streamlining environmental approvals and reducing duplication between state and federal assessment systems.

For NSW, this could mean:

  • faster development pathways,
  • more large-scale housing projects,
  • and increased redevelopment activity across established suburbs.

While this may support housing delivery, it will also continue broader conversations around infrastructure capacity, density, and how communities evolve over time.

What NSW Homeowners Should Take Away From This Budget

At its core, this Budget represents a major attempt to reshape Australia’s housing market over the long term.

The Government is clearly trying to:

  • increase housing supply,
  • encourage investment into new construction,
  • reduce investor competition for existing homes,
  • and improve affordability for future buyers.

Whether these measures achieve those goals will depend heavily on how quickly new housing can actually be delivered in an environment still impacted by labour shortages, feasibility challenges, and elevated construction costs.

For homeowners and owners corporations across NSW, the key takeaway is not to react to headlines alone.

While many of the proposed changes are still subject to legislation, the direction of policy is becoming increasingly clear: governments are attempting to shift investment toward new housing supply while improving affordability for future buyers.

For strata communities specifically, strong financial planning, preventative maintenance, and long-term capital works forecasting will continue to play a critical role in protecting property values and managing future costs.

As the housing landscape continues to evolve, committees and owners who focus on proactive planning and informed decision-making will be best positioned to navigate the changes with confidence.

What Owners Corporations Should Be Thinking About Now

While many of the proposed changes are still subject to legislation, there are several practical steps committees and homeowners can begin considering now:

  • Reviewing long-term capital works planning
  • Stress-testing maintenance budgets against rising construction costs
  • Planning preventative maintenance earlier to avoid reactive repairs
  • Reviewing contractor and remediation timelines
  • Seeking independent financial advice before making investment decisions based on proposed tax changes

For strata communities, proactive planning remains one of the most effective ways to manage uncertainty, particularly in an environment where housing policy, construction costs, and compliance obligations continue to evolve.

Sources:
 UDIA Federal Budget 26/27 Member Briefing
 Commonwealth Bank – 2026 Budget: Updated Housing Outlook
 Perpetual Private – 2026 Federal Budget: The Housing Tax Shake-Up