What the One Nation surge and the state Budget mean for property

Australian politics has rarely felt this unsettled. Through the first half of 2026, Pauline Hanson’s One Nation has done something no minor party has done before — it has led the major parties on the primary vote in successive national polls, with Roy Morgan putting its support near 29.5 per cent by early June. Under our preferential system, Labor remains favoured to form government on a two-party-preferred basis; the party leading on first preferences is not the party most likely to govern. So the interesting question is not who wins. It is why the ground is moving — and what that movement says about the property market beneath it.

Why people are really moving: a broken promise

Strip away the noise and the surge has a clear starting point. Before the May 2025 election — which the government won comfortably — the Prime Minister repeatedly ruled out changes to negative gearing and the capital gains tax discount. In the Budget of May 2026, the government reversed itself, moving to restrict negative gearing and to end the 50 per cent capital gains discount that had stood since 1999. Its critics called it a backflip; the government called it reform. For a great many owners and investors, the label matters less than the precedent: a commitment given, and then withdrawn.

That is the soil the One Nation vote is growing in. What looks from a distance like enthusiasm for a minor party’s platform is, closer up, something simpler and more corrosive — a loss of trust in the two majors, and a wish for a steadier, more predictable hand. People are not so much voting for a manifesto as voting against being told one thing and handed another. Any agent who has sat across a table this year has heard it: not ‘I support One Nation’s policies’, but ‘I no longer believe what either of them tells me’.

The magnitude almost no one is measuring

Here is where the reaction and the reality part company. On the most recent Australian Taxation Office figures, about 2.26 million Australians hold an interest in a rental property, and roughly 1.12 million of them negatively gear. Those are large numbers — and they are exactly why the politics runs hot. But the change actually legislated is far narrower than the fear it provoked. The negative gearing restriction applies only to new purchases of established dwellings made after Budget night; existing arrangements are grandfathered, and new builds are exempt. The capital gains change — replacing the flat 50 per cent discount with an inflation-based discount and a minimum 30 per cent rate on certain gains — applies to individuals and trusts from 1 July 2027, with superannuation funds excluded entirely.

Read that carefully and the contour is clear. The roughly 1.12 million people negatively gearing today are, in the main, untouched. The measure bites on tomorrow’s buyer of an established investment property — a real change, but a prospective and bounded one. Which tells you something important: the heat in this debate is not coming from the size of the dollar impact. It is coming from the broken commitment behind it. The arithmetic is modest. The breach of trust is not.

What negative gearing actually is — in plain terms

It is worth saying plainly what negative gearing is, because it is more often invoked than understood. When the costs of holding an investment property — chiefly loan interest — exceed the rent it earns, the owner runs a real cash loss, and that loss can be set against other income, trimming the tax bill. It is not a windfall. It is a partial offset of money genuinely out of pocket: you still spend more than you receive. The strategy only comes good if the property grows in value — and when you sell, that gain is taxed, the capital gains discount (now being pared back) being the sweetener. Depreciation claimed along the way is effectively recovered through a lower cost base at sale. For most owners, in other words, negative gearing is less a rort than a cash-flow and timing exercise, underwritten by the hope of capital growth.

The distributional picture is genuinely contested, and a fair account should say so. The Parliamentary Budget Office has found around 60 per cent of the negative gearing benefit, and 80 per cent of the capital gains discount, flow to the highest earners. The Property Council counters that roughly two-thirds of those who negatively gear declare taxable incomes under 80,000 dollars, with an average deduction near 8,700 dollars. Both can be true at once — most users are ordinary earners with a single property, while most of the dollar value accrues to a wealthier few. That nuance is precisely what a broad-brush reform, and a broad-brush backlash, tend to flatten.

The superannuation twist — and why it matters

The freshest piece of this puzzle landed on 23 June. As the price of Greens support for that same tax bill, the government agreed to ban new limited recourse borrowing arrangements — the structure that lets a self-managed super fund borrow to buy property — for residential property. Existing loans are grandfathered; commercial and business premises are untouched; the ban begins 45 days after the legislation receives assent. The concern is not new: the 2014 Murray Financial System Inquiry recommended closing this door more than a decade ago.

Once again, weigh the magnitude. There are more than 653,000 self-managed funds holding over a trillion dollars, with around 17.5 per cent of those assets in property — yet residential fund borrowings amount to less than 1 per cent of all Australian home loans. The direct market impact is small. The signal is larger. It closes one of the last avenues for leveraged residential investment and, in a twist that captures the very incoherence owners are reacting to, it leaves the self-managed fund as the one remaining structure in which an established home can still be negatively geared at all. The rules are being rewritten at the edges, repeatedly, deal by deal. That churn is itself part of what is unsettling people.

The forces that aren’t on any ballot: credit and rates

Step back from the tax fight and the levers that move the investment market most are not political at all. From 1 February this year, the prudential regulator capped the share of new loans banks may write to heavily indebted borrowers — no more than 20 per cent at a debt-to-income ratio of six times or higher. Investors feel this most: around 10 per cent of new investor loans already sit above that line, against 4 per cent for owner-occupiers. Lenders count only about 80 per cent of rental income in their sums, and a borrower rolling off an interest-only period onto principal-and-interest can see repayments step up sharply — a cash-flow squeeze that has nothing to do with Canberra’s tax settings and everything to do with how the loan was structured.

Above all of it sits the Reserve Bank. It has lifted the cash rate three times since the start of 2026, to 4.10 per cent, with markets pricing in more — and it was that, not migration or foreign buyers, that the New South Wales Budget named as the reason its stamp-duty and land-tax take has fallen by 8.4 billion dollars. Credit and rates are the market’s real governors. They decide who can borrow, how much, and at what cost, far more directly than any party’s platform — and they are tightening while the political argument rages elsewhere.

Alan’s view: how we traded certainty for choice

Let me add a personal view here, because I have watched this system long enough to remember how it used to work. For most of the post-war era, the price of a home loan was capped by government — the rate on a new mortgage could not rise above a set ceiling, 13.5 per cent at the end. That world ended deliberately. The Campbell Committee, commissioned by the Fraser government and reporting in 1981, found that capping rates was ineffective as a tool of monetary policy, that it throttled competition, and that it merely pushed borrowers toward unregulated lenders charging more. Its blueprint was taken up by the Hawke and Keating governments, who floated the dollar in December 1983, admitted foreign banks from 1985, and on 3 April 1986 removed the ceiling on new home loans altogether. From that day, the mortgage rate has been set by the market — by the banks’ cost of funds, the Reserve Bank’s cash rate, and whatever margin the lender chooses to add.

On balance, I think that was the right reform, and I would not want to go back. The old capped system rationed credit — it decided who got a loan by queue and connection rather than capacity, and it shut a great many people out entirely. Deregulation gave us competition, choice and access. But it carried a price that is rarely named: it traded certainty for flexibility. Under the old rules a borrower knew what the rate could be. Under the new ones the rate floats, the banks can and do move out of step with the Reserve Bank when their own funding costs rise, and — the part that troubles me most — the regulator can rewrite the terms of the loan while you are still inside it.

Interest-only lending is the clearest illustration. At its peak, around 40 per cent of all mortgages were interest-only. Then, in March 2017, the prudential regulator capped new interest-only loans at 30 per cent of a bank’s lending — and in January 2019 it removed that cap again. People who borrowed in good faith on interest-only terms have since faced the jolt of reverting to principal-and-interest, their repayments stepping up sharply — a cash-flow shock that has nothing to do with their property or their conduct, and everything to do with a rule that changed beneath them. Now, in 2026, there is a fresh constraint on how much the banks may lend to highly indebted borrowers, and a ban on self-managed funds borrowing for housing at all. Each measure may be defensible on its own. Together, they describe a system whose terms are never quite settled.

And that, in my view, is the deeper problem beneath all the noise about One Nation, budgets and tax. It is not the level of any single rate. It is the absence of certainty. A borrower can do everything right — buy within their means, service the loan, plan carefully — and still find the ground rules redrawn mid-stream, by a government or a regulator, with little warning. That is the same uncertainty, wearing a different coat, that is moving people away from the major parties. When neither your tax settings nor your loan terms can be relied upon to hold, stability becomes the most valuable word in the market. The lesson I draw is not to fear the changes but to build for them — to borrow with a margin, to assume the rules will move, and never to bet the house on the terms staying still.

The state’s hand: the surcharge, the Budget, and the rezoning on our doorstep

Much of what actually touches a Sydney transaction is set in Macquarie Street, not Canberra. The surcharge a foreign buyer pays on top of ordinary stamp duty is now 9 per cent in New South Wales — 90,000 dollars on a one million dollar purchase, and 450,000 dollars on a five million dollar home, levied before a dollar of standard duty is counted. It is a large part of why overseas buyers were never a major force at the top of this market, well before any federal ban. The State Budget of 23 June added no new property taxes — but it confirmed, in its own revenue write-down, that this market is being moved by rates and supply, not by the federal polling.

It also carried the item closest to home. Thirty point eight million dollars was committed towards completing the long-abandoned Woollahra railway station — platforms begun in the 1970s and never opened, after residents fought the line to the High Court — alongside a state-led rezoning around the Woollahra and Edgecliff stations for up to 10,000 new homes. It is a generational build-out, with no compulsory acquisition of houses, but it will reshape the texture of Edgecliff, Woollahra and Double Bay over the coming decade more than any Senate result. And in the Eastern Suburbs, the difference of a single block may decide whether it lifts your value or tests it.

The reality the targets keep missing

Beneath every policy in this debate sits an arithmetic problem that none of them solves. The median Australian dwelling is now around 922,000 dollars; only about 14 per cent of median-income households can afford the median home, down from 43 per cent just three years ago; it takes roughly 11 years to save a deposit; and in Sydney, servicing a new loan can swallow close to 68 per cent of pre-tax household income. Construction has become the bottleneck — apartment project margins often sit below 5 per cent, entry-level units start near a million dollars on the city fringe, and the National Housing Accord’s target of 1.2 million homes is tracking some 262,000 short. Meanwhile social housing has slipped to around 4 per cent of the stock, and is shrinking.

I will say this as plainly as I can, because I watch it daily. Tax tweaks, and affordable-rental quotas sprinkled through luxury developments or established streets, do not move this dial. For a large and growing cohort, ownership simply does not pencil — not because of negative gearing, but because the cost of building a modest home, before a cent of land, already sits beyond their borrowing capacity. The honest answer the numbers point to is more social and affordable housing, built directly and at scale. The national housing council itself cautions that demand-side measures mostly push prices up; supply is the constraint, and supply is where the construction economics have broken down.

The question neither major party answers

There is a quieter driver of the disquiet, and it deserves naming. Almost every lever on the table is a tax lever. Neither major party has put forward a serious account of how government might generate income other than by taxing property, work and capital more heavily. When reform is framed only as a question of who pays more, a pitch built on stability and restraint finds an audience — even from a minor party — not because its sums necessarily add up, but because it speaks to a fatigue with being the answer to every Budget shortfall. That perception, fair or not, is part of what is moving votes.

Immigration, read through the property lens

One Nation’s headline migration policy — cutting the permanent intake to 130,000 places — is pitched, above all, as relief for housing. The property-relevant facts are worth holding steady. The permanent program is about 71 per cent skilled. The figure that actually drives housing demand, net overseas migration, is dominated by temporary students rather than permanent settlers — and it has already fallen sharply, from a peak of 538,000 in 2022–23 to around 306,000 in 2024–25, and is forecast to keep easing. Because most permanent visas go to people already living here, cutting the permanent cap would do little to change the population pressure on housing in the near term.

The fair reading is the unglamorous one. Migration adds to demand at the margin, against a supply base that cannot keep pace — but it is neither the sole cause of the affordability problem nor a lever that, pulled on its own, repairs it. Treated as a single explanation, it flatters the politics and misreads the market.

What I tell clients

Pull the threads together and the picture steadies. The surge to One Nation is, at heart, about trust — a promise made and unmade — far more than about the dollar weight of any single policy, which on the numbers is narrower than the noise. The forces actually setting the value of your home are the ones that always do: interest rates, the cost and availability of credit, and the supply of quality stock. The political cycle is loud. It is not, yet, a fundamental.

So my counsel is what it would have been in any cycle before this one. Don’t let the polling set your timetable. If the home is right and the moment suits your circumstances, the political weather is a poor reason to wait — and a worse reason to rush. Read the politics clearly. Price the fundamentals. And treat the rest as weather.