Wealthy older Australians are using negative gearing and capital gains tax rules to secure a bigger share of the property market, Reserve Bank research released Thursday found, as Treasurer Jim Chalmers used this month's budget to unveil the biggest change to property tax laws in a generation.
The analysis said the tax system has been a key factor in leaving Australians with some of the highest household debt levels in the world. It found the median age of housing investors rose from 45 in 1999-2000 to 51 in 2022-2023, while the share of investors over 60 more than doubled, from 12 per cent to 28 per cent. Alexandra Michielsen said higher income investors have greater borrowing capacity and have benefited more from tax concessions such as negative gearing and capital gain discounts.
Chalmers' budget move would restrict negative gearing to new properties and return the capital gains tax concession to the pre-1999 system of taxing only inflation-adjusted increases in asset prices. That puts the government at the center of a debate that has run for years over whether the tax system encourages speculation, lifts debt and pushes first-home buyers further out of the market.
The Reserve Bank analysis tracks how the make-up of landlords has changed since the turn of the century as house prices climbed. Higher property prices lifted entry costs and made buying harder for lower and middle-income households over time, Michielsen said, while investor ownership fell among people under 50. Among people in their 50s, investor ownership is slightly higher than in 1999-2000 but sharply lower than in 2010.
The research also found the share of people holding more than one property has climbed by 7 percentage points over the past 20 years, undercutting the argument from supporters of negative gearing that most investors own only one property. The top 20 per cent of income earners now hold almost 40 per cent of all properties, and over the past 10 years investor activity has been marginally skewed to higher-income earners and away from middle incomes.
The Reserve Bank said around 40 per cent of the shift in the age profile was due to broader population ageing, but it added that tax settings have clearly amplified the advantage for older, higher-income buyers with more borrowing power. The result is a market in which investor demand has been increasingly shaped by policy as much as by income, with the biggest gains flowing to those already best placed to buy again. For borrowers watching the policy response, the next test is whether lenders and landlords adjust as the new rules begin to bite, much as ANZ Investor Lending Policy Changes tighten borrowing tests after budget move have already signaled in the banking market.
