Rate and tax changes add new pressure to investor returns
Suburbs with a higher proportion of owner-occupied homes have delivered stronger long-term capital growth than investor-dominated areas, according to new research from Cotality covering 3,000 suburbs between 2010 and 2026.
The gap was widest in the unit market, where a 34-percentage-point difference in growth separated owner-occupier suburbs from investor-heavy suburbs.
Unit values in owner-occupier-dominated suburbs rose 99% between January 2010 and March 2026, compared with a 65% increase in investor-heavy suburbs within the same cities. Applied to the national median unit value of $436,000 recorded in January 2010, this equates to an additional $148,000 in gross capital gains.
The divide was narrower for houses. Values in low-investor suburbs increased 136%, against 117% in investor-heavy suburbs, creating an estimated $83,000 gap relative to the 2010 median house price of $435,000.
“The results are consistent with the idea that owner-occupier heavy suburbs have tended to see stronger capital growth, particularly across the unit segment,” said Annabelle Mezieres, economist at Cotality. “Units in investor-heavy suburbs have historically underperformed because they can be more exposed to sudden supply spikes, changes in market sentiment, and shifts in credit conditions.
“Owner-occupiers typically buy with a focus on liveability and lifestyle, often inject capital via renovations, and hold assets longer, which supports value over time.”
The findings come as lending and tax conditions shift for property investors. Investors accounted for 40% of housing lending by value in the March 2026 quarter, even as the Reserve Bank fully reversed its 2025 rate cuts.
With investor mortgage rates sitting in the mid-6% range and capital city rental yields averaging 3.5%, geared properties face immediate cash flow pressure.
Tax changes announced in the federal Budget will grandfather negative gearing for existing properties from 1 July 2027, while shifting incentives for new investors toward newly built dwellings.
“Future buyers of established stock may not have access to the same tax benefits or borrowing capacity, which could narrow the buyer pool in locations previously attractive to investors,” said Thomas Clarkson, senior manager of analytics and data science at Cotality. “While new builds will benefit from tax incentives, a high rental ratio could have implications for long-term capital gains.
“Additionally, investors are likely to weigh higher entry costs, the potential for a shallower resale market, and reduced scarcity against the appeal of tax benefits derived from new housing options.”
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