The Federal Government’s proposed changes to negative gearing, capital gains tax and family trust structures are set to reshape investor behaviour across Australia.

Yet, according to Kollosche Managing Director Michael Kollosche, the Gold Coast property market remains one of the most insulated and supply-constrained markets in the country.

“The Gold Coast is no longer a speculative holiday market driven purely by investors,” Michael said.

“It has matured into a deeply established owner-occupier and lifestyle market underpinned by interstate migration, infrastructure investment, limited land supply and long-term population growth.”

Supply Constraints to Intensify

Following the delivery of the Budget on May 12, Michael says many commentators are overlooking the most important issue facing the Gold Coast market – a widening imbalance between population growth and housing supply.

“We already have migration materially outpacing the delivery of new housing and, at the same time, we are trying to deliver billions of dollars-worth of infrastructure in the lead-up to the 2032 Olympic Games with severe labour shortages, escalating construction costs  and limited builder capacity.”

He says these pressures will likely prevent many proposed developments from proceeding.

“Unless developers are extremely well capitalised or vertically integrated, many projects simply will not stack up financially or be able to be delivered due to limited access to trades if they have not commenced construction in the next 12 months.

“That means less housing supply, not more, and when supply tightens in a high-demand market, prices and rents naturally continue to rise,” he says.

Investors Likely to Hold Existing Assets

When it comes to the negative gearing changes, Michael says one of the unintended consequences could, again, be a reduction in established housing supply.

“Negatively geared properties will be grandfathered under the new rules, so if an investor has the benefit of that structure, history shows they are more likely to hold the asset long term rather than sell it and lose the benefit,” he says

Michael compares the likely behaviour to what occurred following the introduction of capital gains tax in 1985.

“A significant percentage of owners retained those assets for decades because they were protected under the old rules.

“I believe we will see a similar dynamic emerge now, where fewer established properties will change hands, tightening supply and leading to an increase in prices.”

Demand For New Homes Set To Rise

The preservation of negative gearing and depreciation benefits for newly constructed property will shift some investor demand toward new housing.

Michael says we will see a flow of capital toward new house-and-land packages, townhouses and off-the-plan developments, particularly at the more affordable end of the market. However, the effect will be less prominent at the mid-to-upper end of the market.

“In these segments, tax benefits are rarely the primary driver of purchases. Buyers are still motivated more by lifestyle, quality, scarcity and long-term capital growth, with.”

Michael warns the shift in demand could have negatively affect housing affordability.

“If more investors compete for affordable new housing stock for the tax incentive gains, prices in those sectors will inevitably rise, making it harder, not easier, for first-home buyers to enter the market.”

He advises younger buyers may ultimately find better value in established housing in the short term, but warns those prices also remain anchored to the price of new properties.

CGT Changes Unlikely to Trigger Panic Selling

In the case of CGT, the changes are likely to have less impact than many people fear.

“The introduction of indexation means investors are taxed on the real gain above inflation, not simply the headline gain and therefore they are likely to hold these assets for longer,” Michael says.

“In a higher inflation environment like we are experiencing under the current Labour government, the difference may be far less severe than many assume and investors are unlikely to voluntarily crystallise larger tax liabilities unnecessarily,” he says.

“Most sophisticated investors would rather leverage equity and continue building wealth than sell quality assets and pay significant tax. That mindset among investors supports reduced turnover and tighter supply.

“The ones that will be materially affected will be forced sellers that struggle in the short term in a higher interest rate environment, but those that can ride out the market for 12 months should be well positioned for long-term gain.”

Interest Rates Still the Key Variable

Interest rates remain the dominant short-term market influence.

“Higher rates continue to challenge younger buyers with smaller deposits, while rewarding older generations holding cash and equity,” he says.

“Inflation remains stubborn and there is still a risk of further upward pressure on rates in the short to medium-term with another three rate rises priced in by most economists and banks before the end of the calendar year.”

However, Michael says markets historically rebounded strongly once rate cycles stabilised and began trending down.

“When rates eventually trend downward investor confidence and transaction activity returns very quickly.”

A Window of Opportunity

The broader fundamentals of the Gold Coast property market remain exceptionally strong relative to many other Australian regions.

“We continue to see strong interstate migration, growing infrastructure investment, lifestyle-driven demand, and one of the tightest housing supply pipelines in the country.”

Michael says periods of uncertainty historically create opportunity, rewarding buyers who are prepared to act decisively.

“Once confidence returns and interest rates begin trending down again, competition rapidly increases along with prices so the smart money will be acting over the course of the next six to nine months to secure great assets and fair prices.

“Right now, buyers are often negotiating in isolation rather than competing against multiple parties, and that will likely continue for the remainder of the calendar year,” he says.

“Experienced investors and buyers factor in some short-term softness to their offers but know that quality Gold Coast property has consistently proven its long-term resilience.

“For those who do not need to sell, holding quality assets through this cycle will prove to be the right decision in 12 to 18 months’ time.

“For those looking to buy, periods of uncertainty have historically been some of the best times to secure premium property before the next growth phase begins.”