Australians are being warned to brace for rent increases of up to $50 a week under the Albanese Government’s property tax changes.

The changes, outlined in Tuesday night’s Federal Budget, will wind back negative gearing and capital gains tax concessions for some property investors, a move the government said is designed to improve housing affordability and help more first-home buyers enter the market.

But property experts warn the reforms could have unintended consequences, with some landlords tipped to sell up, reducing rental supply and driving rents even higher in an already strained rental market.

While the Albanese Government estimates rent would rise by around $2 a week, a figure also backed by Commonwealth Bank modelling, some analysts believe the real-world impact could be far greater.

Christian Baylis, Founder and Chief Investment Officer at Fort Lake Asset Management, warned the changes risk making property investment significantly less attractive.

“I don’t really see how it creates more investor demand. I look at this and say, ‘why would investors want to get involved in the property market more today than they did tomorrow?’ I can’t see a justification for that,” Baylis said.

“I actually think it reduces the amount of investors in the market, which ultimately means that you get higher rental prices at the margin.”

Christian Baylis, Founder and Chief Investment Officer at Fort Lake Asset Management, warned property tax changes risk making property investment significantly less attractive. Credit: Sunrise

Federal budget papers argue the reforms would improve housing affordability over time by shifting homes away from investors, toward owner-occupiers.

But critics say the changes come at a dangerous time for renters, with vacancy rates already critically low.

Baylis said just 1.7 per cent of Australia’s housing stock is currently available for rent, describing the market as “very tight”.

The concerns are further compounded, Baylis argued, by high migration, elevated interest rates and ongoing supply shortages, all of which continue to place pressure on renters.

“You can’t have your cake and eat it. You can’t bring in 315,000 people a year and have population growth of 420-odd thousand a year and then go and do that,” Baylis said.

“You have to look at the whole pie and properly calibrate things.”

Under the reforms, negative gearing concessions would still apply to newly built properties, with the government hoping the policy encourages more housing construction.

However, Baylis warned only a small proportion of investor lending currently goes toward new builds, while construction delays, inflation and builder collapses continue to plague the sector.

He warned investors could leave the market far faster than new housing supply can be delivered, potentially worsening rental shortages in the short term.