Key Highlights

  • Change the rules on how residential Investment is taxed and the money does not disappear — it moves.
  • The Albanese government's tax package, legislated to take effect from July 2027, marks the most significant rewrite of property investment
  • Speaking ahead of the AFR Property Summit, two of the nation's biggest office and shopping-centre landlords said Labor's tax changes
  • The appeal is partly structural.

Change the rules on how residential investment is taxed and the money does not disappear — it moves. As Canberra's overhaul of negative gearing and Capital Gains Tax approaches, two of the country's largest office and shopping-centre landlords say investors are already redrawing the map, tilting toward commercial Assets in what one describes as a "seismic" shift.

The Albanese government's tax package, legislated to take effect from July 2027, marks the most significant rewrite of property investment incentives in a generation. From that date, negative gearing on established homes purchased after budget night will be curtailed, with losses no longer deductible against wages, and the flat 50 per cent capital gains tax discount will be replaced by an inflation-indexed system carrying a minimum 30 per cent rate. Newly built homes are carved out to protect supply, but for the classic mum-and-dad investor eyeing an existing house or unit, the after-tax case has fundamentally changed.

A "seismic" reweighting of capital

Speaking ahead of the AFR Property Summit, two of the nation's biggest office and shopping-centre landlords said Labor's tax changes are creating a seismic shift into commercial property, with investor Demand arriving against a backdrop of short Supply that is pushing up rents and, they argue, feeding inflation. The logic is straightforward. If residential investment loses much of its tax shelter, capital seeks the next-best Risk-adjusted home, and commercial property, along with the trusts and syndicates that hold it, is an obvious candidate.

The appeal is partly structural. As Raine & Horne executive chairman Angus Raine has noted, commercial property is often "a very cost-effective investment as the tenant, rather than the owner, normally pays many of the ongoing costs." Knight Frank chief economist Ben Burston has pointed to investors seeking vehicles with lower upfront capital requirements, "including real estate investment trusts and syndicates," rather than buying assets outright.

The listed landlords are already feeling it

The early numbers from the listed sector lend the thesis some weight. GPT Group's interim result showed retail occupancy of 99.8 per cent and office net property income up 8 per cent, and its wholesale shopping centre fund closed an oversubscribed $697 million Equity raise. Strong demand for pooled commercial exposure is exactly the pattern a rotation out of direct residential ownership would produce, and diversified groups such as Dexus, Mirvac, Scentre, Stockland and Charter Hall stand to benefit if the trend broadens.

Yet the landlords' framing is not purely a growth story. Their warning that constrained supply is lifting rents and stoking Inflation is a pointed one, implying the tax changes could have consequences well beyond the property market. If capital crowds into a commercial sector that cannot expand quickly, the result is higher rents rather than more space.

Treasury saw the trade-offs coming

Crucially, the government was not blind to these dynamics. The AFR reports that Treasury warned Jim Chalmers the tax changes would lift rents and lower prices, releasing a heavily redacted summary of its modelling. That modelling has been reported to point to slightly slower house price growth, a modest lift in rents, and a shift of tens of thousands of properties from investors to owner-occupiers. The redactions have drawn criticism, but the direction of travel is consistent with what the landlords are now describing on the ground.

The reform also casts a shadow over Labor's own housing target. By dampening residential investment while carving out new builds, the package is an explicit bet that supply-side incentives can offset weaker investor appetite. Whether that bet pays off, or whether capital simply migrates to commercial property and leaves the 1.2 million-home goal further adrift, is the central tension.

For investors, the message is one of caution rather than certainty. Tax settings can change again, supply constraints can ease, and commercial property carries its own cyclical risks tied to interest rates and tenant demand. But if the landlords are right, the money is already moving, and the reshaping of where Australians park their property Wealth may prove one of the more durable legacies of the 2026 reforms. Markets will be watching the next round of results and capital raisings for confirmation.