Federal budget changes restricting negative gearing to new builds from 1 July 2027 are pushing investor attention toward regional markets where established housing is often the only option, according to Ray White Group head of research Vanessa Rader (pictured).
Rader said the reforms are designed to redirect investor demand into new housing stock, replacing the capital gains tax discount with cost-base indexation for assets held more than 12 months. But in many regional towns, she said, new construction simply isn't happening, leaving established property as the default choice. As Rader put it, "there is no new build alternative" in these locations – a constraint that also shields existing investors from future competition from new stock.
The reforms passed into law in June, with grandfathering provisions protecting properties bought before 12 May 2026 and the new rules taking effect from 1 July 2027.
Yields above 20% in some pastoral and mining towns
Rader's analysis of regional suburbs across Queensland, New South Wales, Western Australia, and South Australia found median house prices mostly below $300,000, with rental yields ranging from 15% to more than 20%.
Queensland's central-west pastoral belt topped the list, led by Aramac at a 33.9% yield on a $120,000 median. Western Australia's Mount Magnet delivered a 31.3% yield on a $49,000 median, while South Australia's mining towns of Andamooka and Coober Pedy also featured prominently.
The common thread across these markets, Rader said, is tightly held rental stock tied to mining, pastoral or government activity, rather than population growth or lifestyle appeal.
"Income returns are the story here, not capital growth," she said, adding that most of these towns have carried similar prices for years with little reason to expect that to change.
Rader's regional pitch lands against a backdrop of investors already responding to the reforms. PIPA's 2026 Annual Investor Sentiment Survey found 18.3% of investors sold at least one property in the year to August – a record high – with more than half of those sales going to owner-occupiers or first-home buyers. Separate modelling has also found the SMSF property ban is expected to strip almost 2,000 dwellings from the supply pipeline by 2029/30, adding further pressure on established housing stock.
For brokers advising investor clients, Rader's research suggests established regional property may offer a workaround for those still seeking cash flow under the new tax settings. As Rader concluded, "the budget has simply made it louder."
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