In the wake of the Federal Government’s proposed tax reforms, one of Australia’s leading property investors, Victor Kumar, has raised concerns about the potential ripple effects on the real estate market. Kumar, a Sydney-based investor with a national portfolio valued at over $40 million, argues that fear-induced decisions could inflict more damage than the reforms themselves, leading to a significant hike in rents across the country.

Kumar, who with his wife Reshmi, manages a portfolio generating $2.14 million in annual rent and held at a conservative loan-to-value ratio of 27 per cent, believes panic is overshadowing rational decision-making at a critical time. “People making this knee-jerk reaction is crazy,” he said. “It might not even see beyond two or three years and it’s not even law yet.”

The investor also questioned the government’s modelling, which suggests that rents would experience minimal increases. “I’d love to see the workings of how they came up with those figures,” Kumar remarked. He emphasised that if investors continue to withdraw from the market, the rental supply will dwindle, inevitably causing rents to surge. “This isn’t a Sydney problem or a Melbourne problem – it becomes everyone’s problem if the rental supply drops even further into crisis territory.”

According to Kumar, early market behaviour is already showing signs of distress, with new townhouse prices in Victoria rising by three to four per cent since the budget announcement. He noted that Sydney, already grappling with a tight rental market due to high property prices, would likely feel the impact first. However, he warned that similar pressures could soon spread to other major cities like Brisbane, Melbourne, Adelaide, and Perth if investor confidence continues to wane.

While some investors are adopting a wait-and-see approach, Kumar, who is also the Managing Director of Right Property Group, notes that well-prepared investors are quietly realigning their strategies. “Our clients aren’t fearful, but they are cautious,” he explained. “We have shifted our investing strategy for the next six months to focus on properties with potential for multiple incomes, prioritising houses already built but less than 12 months old, bringing forward subdivision and development opportunities on existing portfolios, and we also delaying older, smaller ‘set-and-forget’ purchases until yields improve.”

Kumar, who has been investing in property for nearly 30 years, spanning almost every state and territory except the Northern Territory, the ACT, and Tasmania, believes that many investors underestimate the benefits of long-term planning while overestimating the effects of short-term political changes. “I’m seeing it as a huge opportunity, if anything,” he said. “The savvy investors were positioned anyway to pull the trigger on developing new supply via new homes and townhouses on their existing holdings.”

He advocates for policies that genuinely increase housing supply, suggesting that tax incentives could encourage homeowners to upgrade or subdivide their properties, similar to a system previously used in parts of the United States. “This might include allowing homeowners to upgrade or subdivide their family home with tax incentives, which was a system once used in parts of the United States that effectively applied negative-gearing-style benefits to owner-occupiers,” Kumar proposed.

As prospective property investors await clearer signals from the government, Kumar emphasises that experienced investors are already pivoting towards more strategic decisions. “Savvy investors aren’t fearful,” he asserted. “They’re adjusting, they’re planning, and they’re positioning for the next decade, not the next headline or policy pivot.”

Kumar’s insights highlight a crucial moment for the Australian property market, where strategic foresight could differentiate successful investors from those caught off guard by policy changes. His advice underscores the importance of maintaining a long-term perspective amidst short-term uncertainties, encouraging investors to focus on sustainable growth and adaptability in an evolving market landscape.