It's been a difficult few months for property investors. The changes to negative gearing and the capital gains tax discount have reset the maths on established properties, and plenty of investors are rethinking not just whether to buy, but what to buy.
National gross rental yields reached 3.79% in August, the highest level since September 2019. Darwin sat at 6.3% and Hobart at 4.4%. Figures are indicative only and vary by property and location.
Property values have softened across many Australian markets, with tax changes, geopolitical uncertainty and rate rises all weighing on sentiment. But investors aren't looking at prices in isolation. Rental demand is still strong and vacancy rates are low, which is supporting returns even as capital growth slows.
What Changed For Investors
From 1 July 2027, negative gearing for residential property investments will be limited to new builds, and the 50% capital gains tax discount will be replaced with cost-base indexation plus a 30% minimum tax rate on capital gains. Against that backdrop, new investor loans fell 8.6% in the June quarter, with their value declining 10.2%. We went through the detail in how investors are responding to the reforms.
The Rental Market Is Still Tight
While conditions have softened for buyers, the rental market has not loosened with them. Despite moderating population growth and migration, the national vacancy rate sat at 1.3% as of July 2026 and total rental listings were 16.7% below the five-year average.
In practical terms, renters are still competing for a limited pool of properties in much of the country, and that keeps upward pressure on rents. KPMG expects rental growth to track above its long-term average through the rest of 2026, underpinned by supply shortages. For anyone weighing up whether to rent or buy, persistently high rents are part of that calculation too.
What A Gross Rental Yield Actually Is
Gross rental yield is a percentage showing a property's annual rental income against its purchase price or current value. Net rental yield is the more useful number in practice, because it factors in the costs of owning the property. Gross yield is the headline figure you'll see quoted, so it's worth knowing that it flatters the picture.
Why Yields Are Climbing
Yields move on two variables, and at the moment both are pushing the same way. Rents are rising while values are falling, so the income side of the equation is growing against a smaller purchase cost.
National house prices are now forecast to decline 1.1% in 2026, while unit prices are expected to rise 2.2%. That split matters, because units and apartments often deliver stronger rental returns relative to purchase price than detached houses do.
What This Changes About What Investors Buy
Loss-making established investment properties no longer carry the tax advantages they once did. An investor who accepts short-term negative cash flow hoping for long-term capital growth may also face a higher capital gains bill at the other end, so the strategy that worked for the past decade needs rechecking against the new settings.
That's pushing attention towards areas where rents hold up well relative to values, including some regional markets and more affordable outer-suburban locations, and towards units. It's a shift we first wrote about in why investors started focusing on rental income this year, and the tax changes have accelerated it.
Where To Start
For anyone entering the market this spring, understanding both the income and the growth potential of a property matters more than it used to. The wider market picture is in this month's update, and if you already hold a property and are weighing up improving it rather than buying again, your renovation finance options covers that ground.
