NAB models rent rises of up to 30 per cent under Labor's tax changes

By Jessica Hart · 2026-08-24

Three forecasts, three very different rent bills

Three sets of numbers are now circulating about what Labor's housing tax reforms will do to rents. They disagree by an order of magnitude, and the gap tells you almost everything about what each forecaster is assuming. The assumptions buried inside each figure are doing most of the work.

Labor's 2026-27 Budget will restrict negative gearing to newly constructed properties and replace the existing 50 per cent capital gains tax discount with cost-base indexation plus a 30 per cent minimum tax on gains accruing after 1 July 2027. Transitional arrangements protect existing holdings, and investors in new builds can choose between the old discount or the new regime. The policy is designed to tilt investor money toward new supply rather than existing stock.

What NAB put on the table

The number grabbing the most attention belongs to NAB. Gareth Spence, the bank's head of Australian economics, published a scenario in which a one-percentage-point rise in rental yields, from roughly 3.5 per cent to around 4.5 per cent, produces rent increases of between 25 and 30 per cent in Sydney and Melbourne. Spence said the calculation assumes current house prices remain unchanged: "For investment properties in Sydney and Melbourne, a rise in the rental yield of 1 percentage point from about 3.5% to around 4.5% implies an increase in rents of 25% to 30%, assuming the current level of house prices is unchanged."^[1]

That conditional matters enormously. The 25 to 30 per cent figure is not a straight forecast of what rents will do. It is the arithmetic answer to a specific question: if investors demand a higher yield and house prices do not fall to accommodate that demand, how much would rents have to move? Whether investors actually extract that yield in a market where vacancy rates are already tight and tenants' capacity to pay is already strained is a separate question Spence's scenario does not fully resolve.

What Treasury says

Treasury's Budget modelling forecasts the tax changes will have a small impact on rents, with an expected increase of less than two dollars a week for a household paying the current median rent.^[2] That figure comes from Budget Paper No. 1, published 12 May 2026, and it is the government's primary public response to warnings about rental pressure.

Treasury does acknowledge a supply cost. Its own modelling finds the reforms will reduce housing supply by around 35,000 fewer dwellings over the next decade compared to no policy change.^[2] HIA chief executive of industry and policy Simon Croft said the government had effectively conceded the point: "The Government has already acknowledged that its Budget housing tax changes will reduce supply by around 35,000 homes over the next decade."^[3]

The government's answer to that supply gap is its $2 billion Local Infrastructure Fund. Treasury projects the fund will support up to 65,000 new homes over the next decade, more than offsetting the 35,000-dwelling reduction the tax reforms are expected to cause.^[2] That net-positive framing is central to why Treasury lands on a rent impact measured in cents rather than percentage points.

Where industry bodies land

Between NAB's worst-case arithmetic and Treasury's central forecast sits a third set of figures. Master Builders Australia, the Property Council of Australia and the Real Estate Institute of Australia jointly commissioned independent modelling on the Budget's effect. The modelling found the reforms would cause new housing supply to fall by more than 8,700 homes and push rents up by as much as nine dollars a week over the next four years, reaching that level by 2029-30.^[4]

Nine dollars a week is about four and a half times Treasury's estimate, and a fraction of NAB's scenario. The industry modelling sits where you might expect a coalition of property bodies to sit: more alarming than the government line, more restrained than the bank's mathematical extreme. Master Builders, the Property Council and REIA represent businesses whose revenues depend on investment activity in the existing housing stock, which is precisely what Labor's reforms are designed to redirect.

What separates the three numbers

The distance between less than two dollars and 25 to 30 per cent is not a disagreement about data. It is a disagreement about behaviour. Treasury assumes the infrastructure fund lifts supply enough to stabilise rents and that investors' response to changed tax treatment is gradual. The industry modelling assumes investors pull back meaningfully but not catastrophically. NAB's scenario assumes house prices do not adjust at all, which, in a market where falling prices often draw out more buyers and ease yield pressure, is the most brittle of the three assumptions.

Australia's rental market is tight. Vacancy rates in most capital cities remain very low and advertised rents are already elevated. Tenants have little buffer against any upward pressure. But the market is already under stress before the reforms begin, and the incremental effect of the tax changes is harder to isolate from everything else driving rents upward simultaneously.

What all three forecasts share is uncertainty about investor behaviour at scale. If investors in existing properties hold rather than sell when negative gearing is restricted, supply does not contract sharply and rents move modestly. If they exit, prices in established markets fall, new-build yields look relatively better, and the policy's structural goal of shifting investment toward construction begins to work. The rent outcome in any given suburb will depend heavily on which of those responses dominates, and no model published so far can say with confidence which it will be.

Jessica Hart

Jessica Hart writes guides and comparisons for readers making expensive decisions. She starts from the question a reader is actually asking and works outwards until it is answered.