The federal budget confirmed what many investors have been watching, from 1 July 2027, negative gearing will be restricted to new builds, and the capital gains tax discount will be replaced with cost-base indexation for assets held beyond 12 months.
The intent is to shift investor demand toward new housing supply, however the reality, particularly outside capital cities, is more complicated.
These changes do not remove housing pressure, they shift it.
Rental supply is not interchangeable across geographies, and regional markets with limited new development pipelines are particularly exposed. However within that challenge lies an opportunity.
A look at regional markets across Australia reveals many locations where median house prices sit well below $600,000 and rental yields range from 6.3 per cent to 10.7 per cent.
For investors seeking properties that can work on a cash flow basis rather than relying on tax concessions these towns are worth understanding.
Broken Hill is the highest-yielding market on the list at 10.7 per cent, with a median of $217,382.
It is one of Australia's most recognised mining towns, with an ongoing minerals and resources sector alongside arts, heritage tourism and a health precinct servicing a vast surrounding region.
For buyers seeking cash flow at a low entry point, it presents a distinctive case.
Condobolin ($251,976, 8.7 per cent), Nyngan ($200,744, 8.6 per cent) and Peak Hill ($186,426, 8.3 per cent) are agricultural service towns in the central and western wheat and sheep belt, with employment built around farming services, health and education.
At these price points, even modest rental income translates into yields that most metropolitan investors would find difficult to ignore.
Coonabarabran ($282,070, 7.4 per cent) serves a similar agricultural catchment but also benefits from its proximity to the Warrumbungle National Park and the Siding Spring Observatory, which support a small but consistent tourism economy.
Wellington ($346,671, 7.3 per cent) has a broader service economy and sits within three hours of Orange, adding some labour mobility appeal.
West Wyalong ($321,537, 7.8 per cent) is a historic gold mining town that continues to function as a key service hub for the Bland Shire.
Quirindi ($401,602, 6.3 per cent) in the Liverpool Plains sits within one of Australia's most productive agricultural landscapes, with strong cropping and equine industries supporting local employment.
Ouyen ($263,843, 7.8 per cent) in the Victorian Mallee is a small but strategically located town serving one of Australia's most productive dryland cropping regions.
Employment is anchored in agriculture and transport, and the town sits on the main road corridor between Melbourne and Mildura.
Port Augusta ($320,695, 6.9 per cent) occupies a genuinely important position in South Australia's economy, sitting at the top of the Spencer Gulf and serving as a crossroads for road and rail freight moving between Adelaide, the outback, Darwin and Perth.
It has a hospital, schools and government services that employ a significant portion of the local workforce, and its role in supporting the state's renewable energy transition has added a new employment dimension in recent years.
The budget changes do not take effect until 2027, and grandfathering applies to established properties already held.
But investors thinking ahead about where established property still makes sense will increasingly be looking at cash flow rather than tax treatment.
That calculation plays to the strengths of these regional markets in a way that it simply does not in capital cities.
These towns also need people. Healthcare, education, agriculture and resources sectors across regional Australia continue to carry vacancies that population growth would help address.
Entry at these price points, with yields that can stand on their own merits, represents a different kind of investment story, one that does not depend on policy settings remaining unchanged.
56-58 Rowe Street, Ouyen, VIC
This three-bedroom home with attractive wraparound verandah in the Victorian town of Ouyen is well located close to schools, shops and sporting facilities.
It sits on a double block of land and has a single carport.
5/10 Mitchell Terrace, Port Augusta West, SA
This two-bedroom townhouse offers a low-maintenance option in a well-maintained setting. Located close to schools and parkland it is ideal for investors, downsizers and first home buyers.
