Budget tax changes flip property v shares equation for investors

Investors have long debated which is the better investment: property or shares.

You can make a convincing case for either. It depends on the period you choose and how you account for borrowing, income, tax and the costs of buying, holding and selling.

Investing in property has often been favoured by first-time investors because it’s something they know. It’s a tangible asset they already understand after buying their first home. Research from ETF provider Global X bears this out: people with more basic investment knowledge predominantly bought property.

But the budget changes turn the debate on its head. A generation of investors will have to adapt because the sums have well and truly changed.

At Stockspot we wanted to easily quantify it. We created a calculator that compares an investment property with a diversified ETF portfolio using the same starting capital and ongoing household cash. Investors can change the growth rates, rental yield, mortgage rate, costs and tax bracket to see how the new rules could alter the result.

Investment property shift

Consider someone who buys a $1m established investment property on July 1, 2027.

They contribute a $200,000 deposit and borrow $800,000 through a 30-year principal-and-interest mortgage at 6 per cent. Gross rent starts at $35,000 a year, or about $673 a week.

The model allows for a 2 per cent vacancy rate and annual property expenses starting at 1.6 per cent of the purchase price, but these figures can be changed.

Under the previous rules, an investor on a 39 per cent marginal tax rate including Medicare would need to contribute about $27,651 after tax during the first year.

Under the new rules, losses from an established investment property can’t immediately reduce the investor’s tax on salary. Instead, they’re quarantined and carried forward.

The investor’s first-year cash contribution therefore increases to approximately $39,048. That’s an extra $11,397 from their pocket.

How much more rent would they need just to be no worse off?

The starting rent would need to rise from approximately $673 to $894 a week. That’s an increase of about 33 per cent, or $221 a week.

This wouldn’t make the property cashflow-positive. It would simply leave the investor with the same shortfall as before.

Investment property shift

First-year cash required	Previous rules	New rules
Annual contributions after rent, mortgage, cost and tax	$27,651 Baseline	$39,048 $11,397 more
Average each month cash paid from the investor’s pocket	$2,304 Baseline	$3,254 $950 more each month
Rent needed each week To restore the previous cash position	$673 Starting weekly rent	$894 $221 more each week

Of course, landlords can’t automatically increase rents by $221 a week. Rents are set by what tenants can afford and the availability of competing properties. But the calculation shows the pressure facing new landlords. Some will seek higher rents while others will decide established property no longer offers enough reward.

The government wants to redirect investors towards new housing. That’s why eligible new builds retain more favourable negative gearing and capital gains tax treatment. The theory is that investor demand will encourage developers to build more homes.

But giving new properties better tax treatment doesn’t guarantee that more of them will be built.

Developers build only when the expected sale price covers the land, construction, finance and risk. Buyers will pay that price only if they’re confident about what the property will be worth when they eventually sell. A new apartment is new only once. After it’s occupied, it becomes an established property and its next investor won’t receive the same tax benefits.

It’s similar to offering a generous subsidy to the first buyer of an electric car while imposing a tax penalty on everyone who later buys it second-hand. The subsidy may support the first sale but the first buyer knows the resale market will be weaker, so they’ll pay less upfront.

The same logic applies to property. If the future pool of buyers will pay less, the first buyer will pay less too. That can be enough to stop a marginal development from going ahead.

Investment property v shares over 30 years

The tax changes also rewrite the longer-term contest between property and shares.

We compared the same $1m property with a diversified ETF portfolio over 30 years.

We assumed property prices grow by 6 per cent each year. The ETF portfolio earns 8.25 per cent a year after fees and before tax. This includes 6.2 per cent capital growth and a 2.8 per cent income yield, less annual fees of 0.75 per cent.

Both investments start with the same capital. Every additional dollar contributed towards the property’s mortgage, expenses and tax is also invested into the ETF portfolio.

Under the previous rules, property finishes $302,000 ahead. Under the new rules, the result reverses and ETFs finish $333,000 ahead. That’s a $635,000 swing away from property.

The bottom line

After-tax wealth	Investment property	ETF portfolio
Previous rules 30-year holding period	$4.67m $302k ahead	$4.36m $302k behind property
New rules From 1 July 2027	$4.28m $333k behing ETFs	$4.62m $333k ahead
Change between rules	$382k lower Property	$253k higher ETF portfolio

When the same overall household budget is applied to both tax settings, both strategies produce less after-tax wealth. But property suffers a much larger reduction because it faces higher tax when sold and loses the benefit of negative gearing along the way.

These figures aren’t forecasts. Change the growth rates, mortgage rate or rental yield and the result can change. Property could still win if it grows faster.

Based on this example, property would need to grow by an extra 0.38 percentage points a year to produce the same after-tax wealth as before. That means annual growth of about 6.38 per cent instead of 6 per cent.

The point isn’t that ETFs will always beat property under the new tax regime. It’s that established property now has a much higher hurdle to clear.

Stockspot’s free Property vs Shares Calculator lets you compare an investment property with a diversified ETF portfolio, using the same starting capital and ongoing cash contributions. Adjust the assumptions and see how the new tax rules could affect your long-term wealth.

This article was originally published as an opinion piece for The Australian – Budget tax changes flip property v shares equation for investors (28 October 2026).