Budget Tax Reforms Lift First Home Buyer Confidence at Auctions

First home buyers attended Saturday auctions in high spirits as Labor's negative gearing and CGT reforms took effect — but the policy debate is far from over.

The first Saturday since last Tuesday's federal budget told a clear story at auction blocks across the country: first home buyers are feeling the shift.

Hundreds of auctions ran across Australia on Saturday 17 May, and this time aspiring owner-occupiers had a meaningful new advantage. The federal government's reforms to negative gearing and the capital gains tax (CGT) discount — announced in Budget 2026–27 and effective immediately from budget night — changed the competitive dynamic at auction for the first time in decades.

"I think it's great to encourage younger buyers, rather than investors making more money all the time. [It's] giving us young people a shot at it," one successful first home buyer told ABC News at an apartment auction in South Melbourne on Saturday. She had spent more than a year trying to buy before finally securing the property.

Auctioneer Sam Paynter, who called results on the day, noted the mood clearly. "I certainly think first home buyers have got a good pathway to enter the market at the moment, it's positive," he said. He added that some older investors are now "considering their options — and so they should, the government has made it very hard for them."

What the Tax Changes Actually Do

The core change: property investors can no longer use negative gearing deductions on newly purchased existing properties. The ability to offset investment property losses against taxable income — a perk that has been available for decades — is gone for existing dwellings bought from budget night onward.

Two significant carve-outs remain. Investors who purchased existing properties before Tuesday's budget keep their tax position unchanged — the changes are not retrospective. And negative gearing, plus the 50 per cent CGT discount, is preserved in full for investors who buy new builds. The stated policy intent is to redirect investor capital toward new housing construction rather than pushing up prices on existing stock that first home buyers compete over.

Prime Minister Anthony Albanese described the shift directly: "If a young person is going to an auction today, unlike last week, the investor who is bidding against someone who wants to live in that home as their first home won't have the taxpayer by their side subsidising their bids."

He also pointed to the dollar-level impact. Investors previously could "bid that extra $50,000" on an existing property knowing it would be a tax deduction — a concrete financial edge over owner-occupiers with no equivalent subsidy.

Use our [borrowing power calculator](/calculators/borrowing-power) to understand your ceiling before entering any bidding scenario.

What Happens to Rents?

The most common objection to negative gearing reform is that fewer investors buying existing homes will reduce the rental pool and push rents higher. The opposition has vowed to reverse the changes if elected, with Shadow Treasurer Tim Wilson arguing they will "increase rent, build fewer homes, and kneecap young Australians by taxing their first home deposit when it's invested."

Independent economist Saul Eslake, who has spent 40 years advocating for negative gearing reform, disagrees. "Getting less investment in the housing we've already got is actually a good thing," he told ABC News. "It will reduce upward pressure on prices and create more opportunities for aspiring home buyers to realise their aspirations."

Eslake points to the retention of negative gearing for new builds as the mechanism that redirects — rather than simply removes — investor activity. If investors shift toward new construction, that adds to total housing stock and creates downward pressure on rents. "I think this will help to dampen rent price inflation," he said.

The rental market data from the most recent quarter provides some context. According to Domain data cited by ABC News, house rental prices were flat across Melbourne, Adelaide, Perth and Darwin. Sydney, Canberra and Hobart saw growth of approximately 1 per cent. Brisbane recorded the strongest quarterly increase at 3.1 per cent. Vacancy rates edged higher across the country over the same period but remained tight. Domain's own analysis attributed the slower rent growth to renters' reduced capacity to absorb further rises, rather than any meaningful easing of underlying demand.

What First Home Buyers Should Do Right Now

The policy settings have changed, but the mortgage market has not moved in response. Interest rates remain at current levels, lenders have not adjusted product pricing, and the credit assessment process is unchanged. What has shifted is the composition of competition at auction — and that shift is still playing out.

**Get a pre-approval in place before you bid.** With first home buyer confidence up, auction competition among owner-occupiers is likely to increase even as some investors recalibrate. A pre-approval gives you a clear budget ceiling and signals to agents and vendors that you are a ready buyer. Compare [what's available on our cheapest home loan list](/home-loans/cheapest) before you commit to a lender.

**Don't borrow to your maximum.** Policy environments can change quickly — the opposition has committed to repealing these reforms if elected, and the next federal election is due by May 2028. A mortgage you can comfortably service at current rates, regardless of what happens on the policy front, is the most resilient position.

**Existing homeowners: review your rate.** If you purchased in the last few years and haven't compared rates recently, this market moment is worth using constructively. Check our [refinance savings calculator](/calculators/refinance-savings) to see whether a better deal is available.

The budget has changed the conversation for buyers and investors alike. Buying well — at a price that stacks up, with a loan structure that fits your income — remains the strategy that holds up regardless of the political cycle.

[Source: ABC News](https://www.abc.net.au/news/2026-05-17/saturday-auctions-after-budget-tax-reforms-first-home-buyer-bids/106688408)