Australia’s latest Federal Budget has sparked a heated housing debate, especially in Perth and WA. While the Government promotes reforms to improve affordability and support first-home buyers, investors now face greater uncertainty, fewer incentives, and higher tax pressure—at a time when private investment is needed. For low-income households, the risks may be severe, as reduced investor confidence often leads to fewer rental properties, higher rents, and greater strain on tenants. In Perth’s supply-constrained market, discouraging investment could have visible negative effects. Limiting investor benefits may not help first-home buyers as intended.

The WA market is fundamentally different from Sydney and Melbourne. Perth is still experiencing strong affordability compared to eastern states, continued interstate migration, increasing employment opportunities linked to mining and infrastructure, and rising rental demand from local families, skilled migrants, and young professionals. Therefore, removing investor confidence from a market that still lacks sufficient housing supply could worsen the rental crisis rather than solve affordability. At Bargoti Real Estate, we believe understanding the real market implications is essential for investors, homeowners, tenants, and policymakers alike. To clarify these dynamics, this comprehensive market research blog explores:

• The major budget changes affecting investors
• How taxation reforms may reshape Perth’s housing market
• Why low-income households may face increased rental pressure
• Perth suburb-level examples and investment case studies
• Market figures, vacancy rates, rental trends, and demand patterns
• The likely long-term consequences for WA
• Strategic insights for property investors navigating uncertainty

This report takes a deep, detailed look at why the latest Federal Budget may negatively impact investors and low-income earners — especially in Perth’s unique property environment. Housing markets rely on balance. Governments cannot simultaneously discourage investment while expecting rental affordability to improve. And in Perth — where supply shortages still exist across multiple suburbs — the consequences could become particularly significant. To stay informed and protect your interests, subscribe to our updates or contact our team for personalised property market advice.

Understanding the Federal Budget Changes and Why They Matter

1. The latest Federal Budget introduced a series of major housing and taxation reforms aimed at reshaping Australia’s property market. While these measures were promoted as initiatives to improve affordability and reduce investor dominance, many industry professionals — including property economists, REIWA representatives, and Perth-based investors — believe the reforms could create unintended consequences. To understand why this budget may negatively impact investors and low-income households, it is important to first examine exactly what changed.

2. The Federal Government announced several major changes relating to property investment taxation and investor benefits. Key reforms include:

Federal Budget Measure	Intended Government Objective	Likely Perth Market Impact
Restricting negative gearing to newly built homes	Encourage construction supply	Reduced investor demand for established homes
Changes to capital gains tax treatment	Reduce speculative investing	Lower investor confidence
Higher taxation pressure on trusts and investment structures	Increase tax revenue	Reduced property portfolio expansion
Reduced tax advantages for existing property investments	Improve affordability	Potential rental shortages
Broader taxation reforms impacting asset growth	Wealth redistribution	Lower private housing investment

3. At first glance, these policies may appear reasonable. The Government argues that encouraging investment into new housing supply rather than established homes will increase construction activity and improve affordability. However, the Perth market operates under different dynamics than those in the eastern states. This sets up one of the biggest problems with nationwide housing policies—the assumption that all Australian property markets behave similarly. In reality, Perth’s housing market is currently driven by:

• Strong population growth.
• Continued mining sector employment.
• Interstate migration.
• Tight rental supply.
• Construction delays.
• Labour shortages in building trades.
• Rising infrastructure investment.
• Increasing investor activity from eastern states.

Unlike Sydney, Perth remains relatively affordable. Median house prices are still significantly lower than those in eastern capitals, attracting both owner-occupiers and investors seeking stronger rental yields. However, Perth’s challenge is not excessive investor activity, but insufficient housing supply—a critical distinction. As a result, policies intended to cool overheated eastern state markets may unintentionally damage Perth’s housing balance.

4. Perth already experienced this issue during the rental crisis. Vacancy rates dropped below 1 per cent in several periods, creating intense competition among tenants. Families attended inspections alongside dozens of applicants. Students struggled to secure accommodation. A growing misconception within public debate is that investors are the cause of housing affordability problems. In reality, investors account for a large share of Australia’s rental housing stock. Without investors:

• Fewer rental properties exist.
• Vacancy rates decline
• Rental competition increases
• Low-income households face greater stress.
• Families struggle to secure long-term housing.

Low-income households faced rising rents. In many suburbs, tenants are willing to pay above-advertised rents simply to secure housing—a direct effect of limited supply and high demand. This is why discouraging investor participation during a supply-constrained environment may create serious risks.

5. When vacancy rates remain too low, tenants suffer. Even though Perth’s vacancy rate has improved to 2 per cent, many inner-city and high-demand suburbs continue experiencing severe rental pressure. This improvement has not been enough; REIWA data indicates Perth’s vacancy rate remains below the balanced market range of 2.5 to 3.5 per cent. A balanced rental market is important because it:

• Stabilises rents
• Improves tenant choice
• Reduces housing insecurity
• Encourages healthy competition
• Supports long-term affordability

Suburbs close to employment hubs, transport corridors, universities, and lifestyle precincts remain extremely competitive.

Why the Federal Budget May Hurt Perth Property Investors

1. For decades, property investment has been one of the key drivers of Australia’s housing supply. Investors have not only supported the property market financially but have also played a central role in providing rental accommodation for millions of Australians. In Perth, investors have been particularly important during periods of rapid population growth, mining booms, and rental shortages. Now, however, the latest Federal Budget has significantly changed the investment landscape. Property investment is no longer being encouraged in the same way, which could reshape investor behaviour across WA.

2. Investor confidence is one of the most important factors influencing housing markets.

• When confidence rises:
  • Investors purchase properties
  • Rental supply expands
  • Development activity increases
  • Market liquidity improves

• When confidence weakens:
  • Investment slows
  • Rental stock tightens
  • Housing construction falls
  • Affordability pressures rise

3. The latest budget introduces multiple factors that may reduce investor confidence. These include:

• Changes to negative gearing rules.
• Reduced capital gains tax benefits.
• Increased taxation uncertainty.
• Higher compliance pressure.
• Lower long-term investment attractiveness.

For many Perth investors, the issue is not simply taxation. Rather, it is unpredictability. Investors generally prefer stable policy environments, since frequent rule changes create hesitation.

4. Negative gearing has long been one of the most debated aspects of Australia’s property market. Critics argue it benefits wealthier investors. Supporters argue it encourages private investment in housing. The truth is more nuanced. In Perth, negative gearing has historically helped investors hold properties during softer growth periods. Unlike Sydney and Melbourne, Perth’s market has experienced longer periods of slower capital growth. During these phases, tax deductions often helped investors maintain holdings while rental markets strengthened. Removing or restricting these benefits significantly changes investment calculations. Many investors may now reconsider:

• Whether the risk is worthwhile.
• Whether cash flow remains sustainable.
• Whether alternative assets offer better returns.

That shift could reduce investor participation at precisely the wrong time.

5. One of the most controversial budget changes is restricting negative gearing benefits to newly built homes. This creates a major divide between: New housing stock and Established housing stock. In theory, the policy aims to increase construction. In practice, Perth investors may avoid established homes entirely. This could have several consequences. Potential Effects on Established Housing Markets

Market Impact	Possible Outcome
Reduced investor competition	Slower sales activity
Lower investment demand	Reduced property liquidity
Investor hesitation	Longer selling periods
Construction bottlenecks	Delayed new supply
Rental stock imbalance	Fewer established rentals available

This is particularly important in Perth because many tenants rely on established homes in middle-ring suburbs. Not every tenant wants or can afford brand-new developments. Families often seek: Larger block sizes, Established communities, Nearby schools, Public transport access and Existing amenities. If investor demand weakens in these areas, rental supply could shrink over time.

6. Perth has traditionally attracted investors due to strong rental yields. Compared to Sydney and Melbourne, Perth properties often deliver:

• Better cash flow
• Lower entry prices
• Higher gross rental returns
• Stronger long-term affordability

Suburbs such as Baldivis, Armadale, Ellenbrook, Gosnells, Wellard, Byford and Midland have attracted investors seeking yield-focused opportunities. However, taxation reforms may offset some of these advantages. Investors now face:

• Lower tax efficiency
• Higher holding costs
• Greater uncertainty around future reforms

This means even strong rental yields may not fully compensate for reduced investor benefits.

7. Perth has experienced growing interest from interstate investors over recent years. High eastern-state prices pushed many investors toward Perth’s comparatively affordable market. This helped support:

• Housing demand
• Rental supply growth
• Market recovery
• Development activity

However, taxation uncertainty may reduce interstate appetite. Investors often compare markets nationally. If policy risk increases, some may shift toward: Commercial assets, Shares, Overseas investments and Alternative property sectors. That could reduce the momentum of Perth’s investment inflows.

8. One overlooked aspect of the budget debate is the impact on smaller investors. Large institutional investors often possess:

• Better financial flexibility.
• Greater taxation structuring options.
• Stronger cash reserves.
• Long-term holding capacity.

Small investors do not. Many Perth investors own: one investment property, a single rental unit, and a family-backed property asset. These investors are often middle-income earners themselves. They rely heavily on:

• Tax efficiency
• Rental income stability
• Long-term capital growth

As costs rise, smaller investors may leave the market sooner than large institutions. This could reduce the diversity of the rental housing supply.

9. One of the most misunderstood aspects of property economics is cost transfer. When investment becomes more expensive:

• Investors seek higher rents.
• Fewer properties enter the rental market.
• Supply tightens further
• Tenants absorb pressure

Low-income households often suffer the most. Perth tenants are already managing: Rising living costs, Utility price increases, Insurance inflation, Wage pressure and Transport costs. Additional rental pressure could worsen housing insecurity.

The Impact on Low-Income Households Across Perth

1. While investors may face reduced tax incentives and weaker confidence, low-income households could experience even greater long-term challenges from the latest Federal Budget. This is because housing affordability is not only determined by purchase prices. Rental affordability matters just as much. And in Perth, where a significant proportion of residents rely on the rental market, any reduction in available rental supply can quickly create financial stress. Low-income households are often the first to feel the impact of housing policy changes. They have less financial flexibility, negotiating power, and capacity to absorb rising rents, with fewer alternative housing options.

• Less negotiating power.
• Less capacity to absorb rising rents.
• Fewer alternative housing options.

The Federal Budget may unintentionally increase pressure on these households. Although Perth’s rental market has shown modest signs of stabilisation, conditions remain difficult for many tenants.

2. While the vacancy rate has improved from record lows to X% (from a previous Y%), several suburbs continue experiencing intense rental competition. For low-income tenants, however, finding affordable accommodation remains extremely challenging. Many households are already allocating a large share of their income to housing costs; for instance, the median rent in Perth is $Z per week, while the average household income is $A per week. Typically, housing stress occurs when households spend more than 30 per cent of their income on rent or mortgage repayments. Across Perth, this issue has become increasingly common, with B% of renting households experiencing housing stress.

3. Private investors provide a substantial portion of Perth’s rental housing stock. When investor activity slows, fewer rental properties become available, existing rental supply tightens, competition increases, and rental prices rise. As a result, low-income households—who often compete for the most affordable housing—are particularly vulnerable. Even a slight decline in affordable rental stock intensifies pressure rapidly. Consequently, one of Perth’s biggest housing challenges is the shortage of genuinely affordable rental housing. Affordable properties are typically concentrated in:

• Outer suburban areas
• Older housing stock
• Smaller units and villas
• Middle-income suburbs

However, many of these areas are now experiencing rising demand. Suburbs once considered affordable are becoming increasingly competitive. These changes mean that, as affordability pressures spread outward from Perth’s inner suburbs, low-income households face fewer options. Examples include:

Perth Suburb	Historical Affordability	Current Market Trend
Armadale	Affordable family housing	Rising investor demand
Balga	Lower entry prices	Increased redevelopment
Gosnells	Budget-friendly rentals	Growing rental competition
Midland	Affordable unit market	Rising tenant demand
Ellenbrook	Popular with families	Rental stock tightening
Byford	Affordable outer suburb	Rapid population growth

4. Higher-income households may absorb rental increases more easily, whereas low-income households may face difficult choices regarding food, healthcare, transport, education, and utility expenses—even with modest weekly rent increases of $20, $40, or $60—which can significantly impact their financial stability and lead to broader social effects such as housing instability.

• Mental health stress
• Family insecurity
• Educational disruption for children
• Employment instability
• Increased homelessness risk

Beyond individual impacts, policy changes can deepen structural divides. One of the major criticisms of the Federal Budget is that it may widen the gap between: Wealthier homeowners, Property investors with existing assets and Lower-income tenants. Established property owners may continue benefiting from:

• Existing capital growth
• Grandfathered tax arrangements
• Long-term market appreciation

Meanwhile, tenants face reduced supply, rising competition, higher rents, and delayed home-ownership opportunities. This creates a dangerous affordability divide.

5. Population growth increases housing demand. However, housing supply growth has struggled to keep pace. The Federal Budget assumes encouraging new construction will improve supply, and governments often point to social and affordable housing programs as part of the solution. While important, social housing alone cannot solve Perth’s rental shortage. At the same time, construction delivery remains constrained. Meanwhile, Western Australia continues to attract workers from:

• Interstate migration
• Skilled migration programs
• Mining sector employment
• Infrastructure industries

Taken together, these dynamics mean low-income tenants may face pressure long before new housing enters the market. Demand significantly exceeds available stock. Waiting lists remain long. And public housing delivery takes years. Private investors still play a crucial role in housing supply. Reducing investor participation without rapidly replacing supply creates risk.

6. At the local level, inner Perth suburbs remain particularly competitive. Areas near employment centres, universities, and transport infrastructure continue experiencing strong demand. Suburbs such as:

• East Perth
• Victoria Park
• Subiaco
• Leederville
• Mount Lawley
• Carlisle

These areas often attract students, young professionals, hospitality workers, and healthcare employees. Many of these tenants are not high-income earners. If rental supply tightens further, affordability in these areas may deteriorate, potentially pushing tenants farther from employment hubs, increasing commuting costs, and reducing quality of life. Simultaneously, family-sized rental homes are already scarce across Perth. In contrast, many investors prefer smaller apartments, lower-maintenance units, and higher-yield dwellings. However, families require:

• Multiple bedrooms
• Outdoor space
• School access
• Stable communities

If investors reduce purchases of established homes, family rental availability may decline further. This could disproportionately affect Single-parent households, Low-income working families, and Multigenerational households.

Perth Suburb Case Studies – Winners, Losers, and Emerging Risks

One of the most important aspects of understanding the Federal Budget’s impact is recognising that not all Perth suburbs will react the same way. Every suburb has its own:

• Buyer demographics
• Rental demand profile
• Housing stock mix
• Investor activity levels
• Growth drivers

Some suburbs may remain resilient despite investor uncertainty, while others could experience significant changes in rental availability, pricing pressure, and investment activity. At Bargoti Real Estate, analysing suburb-level dynamics is critical because broad national policies often produce highly localised effects. The following Perth case studies illustrate how different markets may respond over the next few years, highlighting the variety of outcomes across the city.

Baldivis: The Investor-Driven Family Market

1. Baldivis has become one of Perth’s most recognised investor-friendly suburbs. Located in the southern growth corridor, Baldivis offers:

• Affordable house prices
• Strong family appeal
• Large land supply
• Good transport access
• Consistent rental demand

2. The Federal Budget may slow investor appetite in suburbs like Baldivis. Many investors here rely on long-term capital growth, tax efficiency, and affordable financing structures. If investor incentives weaken, demand for established homes may soften, leading to slower property turnover, reduced rental stock expansion, and lower development momentum. At the same time, rental demand remains strong. Historically, investors were attracted by relatively low entry prices, healthy rental yields, population growth, and new infrastructure development. This mix of counteracting forces shapes Baldivis’s market outlook.

• Relatively low entry prices
• Healthy rental yields
• Population growth
• New infrastructure development

Families continue moving into Perth’s outer suburbs due to affordability constraints closer to the CBD. This creates an important contradiction: Demand remains high, but investment confidence may weaken.

Armadale: Affordability Under Pressure

1. Armadale has long been considered one of Perth’s more affordable housing markets. It has attracted:

• First-home buyers
• Investors seeking strong yields
• Budget-conscious tenants
• Multi-generational households

2. The suburb has also benefited from: Infrastructure upgrades, Transport improvements and Population growth. However, affordability itself may now create increased competition. If investors shift toward newly built properties only, established housing markets in Armadale could experience lower transaction activity. At the same time:

• Rental demand may continue rising.
• Affordable housing supply may tighten.
• Low-income tenants could face increasing pressure.

Armadale illustrates one of Perth’s key affordability risks, showing that even traditionally affordable suburbs are becoming more competitive as market pressures rise.

Midland: The Affordable Rental Hub

1. Midland remains an important housing and employment centre in Perth’s eastern corridor. The suburb attracts: Healthcare workers, Students, Hospitality employees and Lower-middle-income households. Its rental market is highly important because many tenants rely on affordable units and villa accommodation. If investors reduce activity in established housing stock:

• Rental supply growth may slow.
• Affordable units may become harder to secure.
• Competition among tenants could intensify.

2. Midland also highlights another issue: older housing stock often requires private investor capital for upgrades and maintenance. Reduced investor participation may limit refurbishment activity over time, compounding challenges in the affordable rental market.

Ellenbrook: Population Growth Meets Supply Constraints

Ellenbrook has undergone a significant transformation over the past decade. The suburb now benefits from: Expanding transport connectivity, Strong family demand, New retail and education infrastructure and Continued population growth. Investors have played a major role in supporting Ellenbrook’s housing expansion. However, the Federal Budget could influence future investor sentiment. Many investors now face a difficult decision:

• Should they purchase established homes with reduced tax benefits?
• Or focus exclusively on new construction despite building delays?

This uncertainty may reduce investor activity in the short term. Meanwhile, tenant demand remains strong. This could continue to put upward pressure on rents.

Victoria Park: Lifestyle Demand and Rental Competition

The challenge in suburbs like Victoria Park is a shortage of supply. There is limited room for large-scale expansion. This means reducing investor participation may directly impact rental availability. Lifestyle suburbs often experience rapid rental escalation when supply tightens. Low-income tenants can quickly become priced out. Victoria Park remains one of Perth’s most desirable lifestyle suburbs. Close proximity to: Perth CBD, Crown Entertainment Precinct, Curtin University and Public transport. Rental demand remains particularly strong among: Young professionals, Students, Hospitality workers and Couples.

Byford: The Outer Growth Corridor Challenge

Byford has emerged as a major growth corridor suburb. Affordable land, family-friendly environments, and infrastructure expansion have driven significant demand. However, outer suburban growth markets depend heavily on: Investor confidence, New construction activity and Developer participation. If tax reforms weaken investor appetite, momentum in the growth corridor may slow. This creates broader risks for:

• Construction employment
• Housing supply delivery
• Infrastructure-linked development

Coastal Suburbs and Affordability Pressure

Affordability is becoming increasingly difficult. Many lower-income tenants are already being pushed further inland. If rental stock tightens further, lifestyle suburbs may become even less accessible for working-class households. Areas such as:

• Scarborough
• Alkimos
• Quinns Rocks
• Rockingham

remain attractive for both owner-occupiers and tenants. Perth’s coastal suburbs continue to experience strong demand driven by their lifestyle appeal

Perth CBD Apartment Markets

1. Perth’s apartment sector presents a different challenge. Inner-city apartments have historically relied heavily on investor participation. Budget reforms may reduce investor appetite for:

• Older apartments
• Established CBD units
• Lower-growth apartment markets

This could influence: Resale activity, Rental stock turnover and Inner-city supply dynamics. Perth’s CBD continues to attract international students, Young workers, FIFO employees, and Temporary migrants. Demand remains present. But investor confidence may weaken. The following suburb categories may face the greatest pressure under the latest budget:

Suburb Type	Risk Level	Key Concern
Affordable rental hubs	High	Reduced rental supply
Investor-heavy outer suburbs	High	Lower investment demand
Inner-city rental zones	Moderate-High	Tightening affordability
Growth corridor suburbs	Moderate	Slower construction activity
Lifestyle coastal areas	Moderate	Increasing rental exclusivity

2. Federal policy creates broad direction. But local suburb-level dynamics determine the real-world impact. Some Perth suburbs may adapt relatively well. Others could experience: Higher rents, reduced rental choice, Slower investment activity and Increased affordability pressure. For investors and tenants alike, understanding local conditions will become increasingly important over the coming years. Despite the risks, Perth retains several strong long-term fundamentals:

• Relative affordability
• Resource sector strength
• Infrastructure investment
• Population growth
• Employment expansion

This means Perth may remain more resilient than markets in eastern states. However, resilience does not eliminate risk. The key concern is whether housing supply can keep pace with demand if investor activity slows.

Conclusion: Perth’s Housing Future Requires Balance, Not Uncertainty

The latest Federal Budget has decisively reshaped Australia’s housing conversation, especially regarding property investment, affordability, and rental supply. The Government presents these reforms as solutions for first-home buyers and a check on investor dominance. However, the reforms will complicate Perth’s housing market. Perth’s property market conditions differ from those in Sydney and Melbourne. Western Australia is one of the nation’s most affordable capital city markets, but it now faces strong population growth, tight rental conditions, mounting housing shortages, and persistent construction delays. This is a fragile housing environment, and undermining investor confidence will worsen affordability pressures rather than solve them. Private investors continue playing a major role in Perth’s housing ecosystem. A significant portion of the city’s rental stock is provided by everyday investors who purchase established homes, townhouses, and apartments across middle-ring and outer-growth suburbs. When investor participation slows, rental supply growth often follows suit. The result can be tighter vacancy rates, rising rents, and greater competition among tenants — particularly for affordable housing options. Low-income households are likely to feel the greatest pressure.

Many Perth tenants are already managing rising living costs, utility increases, transport expenses, and financial stress. Even modest rent increases can significantly impact working families, students, pensioners, and lower-income earners. If rental availability tightens further due to weaker investor activity, affordability challenges across Perth could intensify over the coming years. Suburbs such as Armadale, Midland, Baldivis, Ellenbrook, and Byford highlight this growing concern. These areas have traditionally offered relatively affordable housing options for families and tenants, but rising demand and limited supply are already pushing prices upward. Inner-city lifestyle suburbs, including Victoria Park, Carlisle, and Subiaco, are also experiencing strong rental demand, making affordability an increasing challenge for essential workers and younger households. The biggest issue facing Perth is not excessive investor activity — it is insufficient housing supply. While the Federal Budget aims to encourage investment in newly built homes, Western Australia’s construction sector continues facing labour shortages, rising material costs, approval delays, and builder capacity constraints. This means new supply may not enter the market fast enough to offset reduced investment in established housing stock.

At Bargoti Real Estate, we believe Perth’s long-term fundamentals remain exceptionally strong. Population growth, infrastructure investment, mining-sector employment, and relative affordability continue to position Perth as one of Australia’s most promising property markets. However, sustainable growth requires balance. A healthy housing market depends on:

• Stable investor confidence
• Ongoing construction activity
• Affordable rental supply
• Support for vulnerable households
• Sensible long-term policy planning

As we look ahead, we urge policymakers, industry leaders, and the community to work collaboratively to ensure that housing supply keeps pace with demand. Only through balanced, well-considered action can we safeguard affordability and support all Perth residents. Let’s commit to proactive solutions that create a housing market benefitting everyone.

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