Your Borrowing Capacity Just Dropped 20-30%. Here's Why That's Not the Disaster You Think

The 2026 budget’s changes to negative gearing have already reshaped what the banks will lend. The number getting all the attention is a 20 to 30 per cent serviceability hit for property investors, now that negative gearing benefits no longer count toward borrowing capacity. Someone who could previously borrow $1.5 million might now be assessed at $1.2 million. Someone with a $1 million ceiling is looking at $800,000.

Cue the fear-inducing headlines. But the real story is a recalibration, not a reason to abandon the market.

For the full breakdown of every change in this year’s budget, not just negative gearing, see: What Do 2026 Budget Changes Mean for Sydney Property Buyers?

The novice investor vs. the experienced investor

We had a young, first-time investor who, after the budget landed, started talking himself out of buying altogether. He’d spent two years scrimping and saving a deposit, convinced property was the way to build wealth in Australia, and the moment his borrowing number dropped, that conviction wobbled. He started sizing up other investment options instead.

The conversation that got him back on track was simple: let’s go through every option on the table properly. But also, if you can only borrow $800,000 instead of $1 million, what else out there is going to outperform property at that price point, using the same kind of leverage, four-to-one or nine-to-one, whatever it is with the bank?

Once he sat with that question, the panic passed. The world hadn’t ended, and property was still as safe as houses.

That’s the pattern we see over and over: people get scared of the headline before they understand what it actually means for their number. A lower borrowing capacity doesn’t mean you’re locked out of the market. It means you adjust your price point and keep moving. It’s the same instinct that makes people wait to buy until after an election, on the logic that the result might change things. If you wait for certainty, you could be waiting indefinitely.

Why structure matters more now

There’s a structural shift worth flagging too. General advice used to be: buy your first one or two investment properties in your personal name, then consider a trust or company from property three onward. With negative gearing stripped out of the serviceability calculation, that default is worth revisiting from day one. A company structure preserves borrowing capacity and sidesteps the changes altogether, since the new negative gearing and capital gains tax rules simply don’t apply to companies the same way.

The takeaway isn’t “don’t worry about it” in a dismissive sense. It’s adjust your strategy and keep rolling. A recalibrated number is not a closed door.

This topic is unpacked in full, with the real numbers and the back-and-forth, on Episode 2 of Pivot to Profit. Give it a listen for the full conversation.