What the federal budget changes mean for WA property investors and future development
Western Australia could benefit from an $8 billion boom in private rented construction; A real estate expert in Perth predicts changes in negative gearing will act as a “tipping point” for a new wave of home building.
But Limnios Property Group chief executive James Limnios fears red tape could hinder development where he says it is needed most.
He pointed to Australian Bureau of Statistics data showing the total value of property investment in WA has doubled in the last two years due to the city’s chronic rent shortage.
“Last year, total real estate investment in the province exceeded $16 billion,” Limnios said.
“But the bulk of this investment has gone into established properties rather than new rental housing.
“In the March 2026 quarter, 79 per cent of investor spending in WA (about eight in every ten dollars) went on established properties, with the remainder on new-build or under-construction homes.”
However, when he handed out the federal budget in early May, Chancellor of the Exchequer Jim Chalmers announced plans to limit negative gearing and capital gains deduction on new construction.
“Anyone who wants to invest in a property with a negative trend can still invest in a new home,” the treasurer said at the time.
Limnios, a former Perth City councilor whose work covers the inner-city property market, said investors already benefit from maximum depreciation allowances and other government incentives when buying new homes.
He said the negative gearing changes could be “a tipping point for a new wave of investor-focused construction.” And he predicted areas closer to the city are poised for greater focus.
“The reality is that Western Australia still faces a chronic shortage of rental properties, and in Perth in particular, vacancy rates remain at historic lows,” he said.
“This is particularly true in Perth’s inner and proximate suburbs, where the supply of new medium- and high-density housing has lagged in recent years.
“Demand for rental accommodation within a five-kilometre radius of Perth CBD remains very high, but supply is extremely limited.
“However, house prices have now reached levels that make new housing projects financially viable in this inner-city area; these adverse changes could help further development move forward by increasing pre-sales from investors.”
But Limnios said this opportunity could be “squandered” without initiatives such as the government financing projects and guaranteeing the 20 per cent mortgage deposit required to buy a home in these developments.
He also called for GST and stamp duty to be reduced for infill developers and called for inner-city building approvals to be reduced to 90 days, as well as preventing planning authorities from “stopping the clock”.
Public art contribution taxes and design review panel meetings, which increase costs and determine approval timelines, also need to be reviewed, Limnios said.
“Currently the planning system is only geared towards supporting large developers, which means thousands of homes in inner-city and near-city areas that could be delivered by smaller developers will never be built,” he said.
Meanwhile, another real estate expert predicts a “property comeback” as investors turn to other ventures in the wake of headwinds and capital gains tax changes.
Ray White Commercial CEO James Linacre believed the changes announced earlier this month would not drive investors away from property but “away from passive residential investment as Australians have traditionally understood it”.
“In many ways, this may have less to do with the removal of tax incentives and more to do with the changing philosophy around investing itself,” he said.
“The reality is that most leveraged commercial property investments are not negatively oriented in the way that residential assets often are.
“Commercial property has historically provided materially stronger rental yields, longer lease tenure, annual rent reviews and, in many cases, stronger income flexibility.”
Linacre said this did not mean there would be an exodus from residential property, which he described as the “core asset class in Australia”, but said the logic of holding multiple passive residential investments “could become increasingly difficult” if tax efficiency rather than income performance were at the forefront.
But he also noted that Chalmers’ changes alone would not solve the country’s housing crisis.
“Australia’s affordability problem is not just the result of investor engagement,” he said.
“The main problem remains the supply problem.
“We are not building enough housing in the locations where people need and want to live.”
