2026 Federal Budget: What First Home Buyers and Property Investors Need to Know

The 2026 Budget's Headline Housing Announcements

Budget night on 12 May 2026 was a watershed moment for Australian housing policy. With property affordability remaining one of the most pressing political and economic issues in the country, Treasurer Jim Chalmers announced a package of measures designed to get more Australians — especially first home buyers — into the market.

At the same time, the government took aim at the investment property concessions that many critics say have inflated prices, proposing changes to negative gearing and capital gains tax that will reshape the investment landscape from 1 July 2027.

The key announcements fall into three categories:

• Expanded first home buyer assistance — broader access to the First Home Guarantee and the new Help to Buy shared equity scheme
• $10 billion housing supply fund — 100,000 homes built and sold exclusively to first home buyers at below-market prices
• Negative gearing and CGT reform — fundamental changes to how property investors are taxed, effective from 1 July 2027

First Home Guarantee Expanded: What's Changed?

The First Home Guarantee (FHG) — previously known as the First Home Loan Deposit Scheme — has been supercharged in the 2026 Budget. The most important change is the removal of the annual place cap.

Previously, the FHG offered a limited number of spots each financial year, meaning tens of thousands of eligible buyers missed out. Under the new rules, any eligible first home buyer can access the scheme — there are no queues, no ballots, and no arbitrary cut-offs.

The income caps have also been removed for this scheme, broadening access significantly. Here's how the scheme works post-Budget:

• Buy with as little as a 5% deposit
• No Lenders Mortgage Insurance (LMI) — saving buyers thousands of dollars
• Available for both new and established properties
• No annual place limit — open to all eligible first home buyers
• Minimum 2% deposit for properties under certain price thresholds in some lender products

For a Melbourne buyer purchasing a $750,000 property with a 5% deposit ($37,500), avoiding LMI could save between $12,000 and $22,000 depending on the lender and loan size. Our team at IFG's First Home Buyer Loans service can help you navigate the scheme and find a participating lender.

The Help to Buy Scheme: How the Shared Equity Model Works

Launched in December 2025 and expanded in the 2026 Budget, Help to Buy is the government's shared equity scheme — one of the most powerful tools now available to first home buyers who struggle to save a large deposit.

Under Help to Buy, the Commonwealth Government co-purchases your home alongside you, reducing the size of the mortgage you need to service:

• Government contributes up to 40% of the purchase price for a new home
• Government contributes up to 30% of the purchase price for an existing home
• You need a deposit of just 2%
• No LMI payable
• You own the home — the government holds an equity share, not a landlord role
• You can buy out the government's share over time as your equity grows

$10 Billion Housing Fund: 100,000 Homes for First Home Buyers

In one of the most ambitious supply-side interventions in recent Australian history, the government has committed $10 billion to build and sell 100,000 homes exclusively to first home buyers at below-market prices.

Construction is expected to begin during the 2026–27 financial year. Key details:

• Homes will be sold only to first home buyers — not available to investors
• Prices will be set below comparable market values in each location
• Sites will be distributed across major capital cities and regional areas
• Priority given to buyers who have been locked out of established markets

For Melbourne and Geelong buyers who have been outbid on established properties, this fund represents a genuine new avenue into ownership — particularly in growth corridors where new builds are being prioritised. Our brokers can help you assess whether these opportunities align with your first home buyer finance strategy.

Negative Gearing Changes: What Happens From 1 July 2027?

This is the most significant change for property investors and potentially for the broader market. From 1 July 2027, the rules around negative gearing will change materially.

Under the current rules, if your investment property costs more to hold than it earns in rent (i.e. it's negatively geared), you can deduct that shortfall against your other income — including your salary. This has long been a cornerstone of the Australian property investment model.

Under the new rules:

• New residential properties (those that add to housing supply) will remain fully negatively gearable
• Established residential properties purchased after Budget night (12 May 2026) will no longer be deductible against general income
• Losses on established properties can still be offset against rental income and carried forward to future years
• Grandfathering: properties purchased before Budget night retain full negative gearing deductibility under the old rules

Capital Gains Tax Reform: How Property Investment Returns Will Be Taxed Differently

The government is also overhauling the Capital Gains Tax (CGT) discount that applies when you sell an investment property. This reform takes effect from 1 July 2027.

Under current rules: if you hold an investment asset for more than 12 months, only 50% of the capital gain is included in your taxable income — effectively halving the tax on your profit.

Under the new rules from 1 July 2027:

• The 50% CGT discount will be replaced by inflation-adjusted indexation — you'll only pay tax on the "real" (inflation-adjusted) gain, not the nominal gain
• A minimum 30% effective tax rate on realised capital gains will apply in many situations
• Unlike the negative gearing changes, existing investment properties are not fully grandfathered — all gains realised after 1 July 2027 are subject to the new rules regardless of when you bought

For investors planning to sell in the next few years, the new CGT rules mean careful modelling of the tax implications is essential. Our team can refer you to a qualified tax professional and, where relevant, discuss how refinancing your investment property portfolio may optimise your position — see our refinancing service for more information.

Will These Changes Actually Make Melbourne Housing More Affordable?

The honest answer is: somewhat, but not dramatically in the short term.

The expanded first home buyer schemes directly reduce the upfront barriers to ownership — and the removal of the FHG place cap is genuinely significant. For Melbourne buyers who have been shut out by the lottery system, this is a material improvement.

The negative gearing and CGT changes are designed to reduce investor competition for established homes over the medium term. The government projects dwelling price growth will slow to around 3% per year through to December 2026 — partly due to the higher interest rate environment and partly as the market digests the policy changes.

However, economists broadly expect any price reduction from the tax changes to be gradual and partial. First home buyers will face less investor competition in some segments, but affordability gains may be diluted if investor withdrawal also reduces rental supply, pushing up rents and making saving for a deposit harder.

The $10 billion supply fund for below-market first home buyer homes is the most direct affordability measure in the package — but those homes won't appear in Melbourne suburbs overnight. The construction pipeline begins in 2026–27, with meaningful supply likely 2–4 years away.

What Melbourne Borrowers Should Do Right Now

Whether you're a first home buyer, upsizer, or property investor, the 2026 Budget changes create both opportunities and urgency. Here's what we recommend:

For First Home Buyers

• Check your eligibility for both the First Home Guarantee and Help to Buy — the expanded FHG has no place limits, so there's no longer a race to apply in July
• Understand the Help to Buy income and price caps — Melbourne's $950,000 cap suits many buyers but excludes some premium suburbs
• Get pre-approved now — with the RBA having raised rates three times in 2026, lenders are tightening their serviceability criteria; a pre-approval locks in your current borrowing power
• Speak to an IFG broker about which participating lenders offer the best rates and conditions within these schemes

For Property Investors

• Review your existing portfolio with a tax adviser — your current properties are grandfathered on negative gearing, but the CGT changes from 2027 apply to all future sales
• Consider new builds if you're looking to buy an investment property — new residential properties retain full negative gearing deductibility under the new rules
• Model your exit strategy — if you plan to sell an investment property after 1 July 2027, the new CGT rules may significantly alter your net return
• Explore whether refinancing existing investment loans could reduce your holding costs in the current rate environment

For Everyone

• With the cash rate now at 4.35% following three 2026 hikes, review whether your current home loan rate is still competitive — our brokers can run a free health check
• If you're on a fixed rate expiring soon, start planning now; the revert rate shock can be significant in the current environment