High-Net-Worth Investors Cut Property Exposure 4 Points After Budget Changes

Investors with $5 million to $10 million shifted into ETFs as negative gearing limits and trust tax proposals reshaped portfolio construction, Netwealth reported.

By the Family Office Real Estate Daily Desk·Thursday, October 8, 2026·2 min read

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Why are high-net-worth investors reducing residential property exposure and shifting into ETFs in 2026?

Netwealth's 2026 Investment Trends High Net Worth Investor Report found that high-net-worth investors with $5 million to $10 million in investable funds cut residential property exposure by 4 percentage points following May 2026 Federal Budget changes, including limits to negative gearing and a proposed 30 per cent minimum tax on discretionary trust income. The same cohort increased ETF uptake, a trend observed across most wealth segments.

Key facts

Netwealth's 2026 Investment Trends High Net Worth Investor Report recorded a 4-percentage-point drop in residential property exposure among high-net-worth investors with $5 million to $10 million in investable funds.
Lindsay Coates, Netwealth executive general manager of private wealth and banking, said the May 2026 federal budget marked a turning point for high-net-worth investors putting money into residential property.
Affluent investors with $1 million to $2.5 million in investable funds increased their residential property exposure by nearly 10 percentage points in FY26, according to Netwealth.
Netwealth's report identified three budget-related drivers behind the property shift: limits to negative gearing on older dwellings, a tax increase for superannuation balances over $3 million, and a proposed minimum 30 per cent tax rate on income earned through discretionary and family trusts from 1 July 2028.
ETF exposure among affluent investors ($1 million to $2.5 million) rose from 55 to 67 per cent in FY26, the strongest gain across wealth segments, according to Netwealth.
Netwealth found that the share of high-net-worth investors favouring a wealth-preservation strategy rose from 11 per cent to 20 per cent heading into FY27.

High-Net-Worth Investors Cut Property Exposure 4 Points After Budget Changes — Image: editorial illustration · Story sourced from moneymanagement.com.au

High-net-worth investors reduced their exposure to residential property by 4 percentage points in the year ending June 2026, according to Netwealth's 2026 Investment Trends High Net Worth Investor Report. The decline centred on investors holding $5 million to $10 million in investable assets and followed legislative changes introduced in the May federal budget.

The budget capped negative gearing on older dwellings, raised taxes on superannuation balances above $3 million, and proposed a minimum 30 per cent tax rate on income earned through discretionary and family trusts starting July 2028. Netwealth identified the measures as the driver of what it called a turning point in residential property investment by wealthy Australians.

Lindsay Coates, executive general manager of private wealth and banking at Netwealth, said the budget marked a shift for high-net-worth investors putting money into residential property. As high-net-worth investors reduced property exposure, affluent investors with $1 million to $2.5 million to invest increased their residential property holdings by nearly 10 percentage points in the 2026 financial year, the report found. That group typically invests a greater share of overall wealth into property and is slower to shift focus, Coates said.

ETF adoption rose across most wealth segments as property allocations fell. Investors with $1 million to $2.5 million increased ETF exposure by 12 percentage points, from 55 per cent to 67 per cent. Ultra-high-net-worth investors holding $10 million to $70 million raised ETF exposure by 7 points, from 56 per cent to 63 per cent. Emerging high-net-worth investors with $2.5 million to $5 million lifted ETF holdings by 4 points, from 60 per cent to 64 per cent.

The shift into ETFs coincided with a drop in hybrid securities exposure across the board, with declines ranging from 4 to 7 percentage points. ETFs spread risk across many assets and offer more stability, higher trading volumes and regular distributions, Coates said. As more high-net-worth investors moved to decrease risk exposure in the 2026 financial year, the shift toward ETFs made sense, he said.

Allocations that look conservative when policy is stable often turn out to be the ones that compound when the rules change overnight, family office advisor Jaf Glazer has noted.

Netwealth said it had not yet seen data showing affluent investors would follow high-net-worth investors and reduce residential property exposure. Given the shift in market signals since the budget, the firm is watching to see if those signals herald a decline in residential property investment by affluent investors in the 2027 financial year, Coates said.

Income generation ranked as the most common goal among high-net-worth investors, while wealth preservation and diversification also drove portfolio decisions. Investors said advice from financial professionals would be the strongest driver of investment selections this year as they navigate regulatory changes, market volatility, interest rates and geopolitical considerations, Coates said. Netwealth expects high-net-worth investors to favour a protective approach in the 2027 financial year, with the share opting for strategies that preserve and protect existing wealth rising from 11 per cent last year to 20 per cent.

The Deployment Angle

Family Office Real Estate Daily Desk · our analysis, not the source's

The 4-point property reallocation is modest in basis-point terms but the speed matters more than the magnitude. A legislative trigger that moves $5 million-plus allocators inside twelve months signals that tax policy now drives portfolio construction faster than yield or cap-rate spread. Family offices holding Australian residential exposure through trusts or leveraged structures should reprice the after-tax return assuming the 30 per cent minimum trust rate takes effect in July 2028. If a property throws off $200,000 in net rental income and the trust previously distributed at an effective 20 per cent rate, the new floor adds $20,000 in annual tax drag. Multiply across a portfolio and the IRR compression is measurable.

The ETF uptake is a liquidity move dressed as diversification. Investors are not rotating into ETFs because the underlying exposures changed. They are buying daily liquidity and transparent pricing because residential property just became harder to exit and harder to finance. That makes ETFs a hedge against policy risk, not a conviction bet. Family offices should treat the 12-point jump in the $1 million to $2.5 million cohort as a leading indicator. Smaller allocators move first because they have fewer direct-ownership routes and less access to separate accounts. The ultra-high-net-worth segment followed with a 7-point increase, suggesting the liquidity premium now outweighs the fee drag even for principals who can negotiate institutional pricing.

The fact that affluent investors increased property exposure by 10 points while high-net-worth investors cut tells you that information and execution speed are now the alpha. The smaller cohort is slower to shift focus, Netwealth said. That is a polite way of saying they are still buying what the larger cohort is already selling. Family offices with exposure in the $1 million to $2.5 million wealth management channel should assume those clients are holding residential property at precisely the wrong time in the cycle. If you are co-investing or syndicating deals that rely on that capital base, price in a twelve-to-eighteen-month lag before those allocators wake up to the tax math and start redeeming.

The 20 per cent of investors now prioritising wealth preservation over growth is the number to watch. That is double last year's 11 per cent and it means one in five high-net-worth allocators have stopped trying to beat the market. They are trying not to lose. In that environment, the deployment angle is not which property sector or which ETF. It is whether to deploy at all. Family offices that built dry-powder discipline into the allocation framework will outperform the ones that stayed fully invested through the regulatory reset. The families that compound capital are the ones that can sit still when the policy risk is higher than the opportunity cost.

Questions this story answers

01Why did high-net-worth investors reduce their property exposure in 2026?

Netwealth's 2026 report points to three factors from the May 2026 Federal Budget: limits to negative gearing on older dwellings, a tax increase on superannuation balances over $3 million, and the government's proposal for a minimum 30 per cent tax rate on income earned through discretionary and family trusts, effective from 1 July 2028.

02Which investor segments increased their ETF exposure the most in FY26?

According to Netwealth's 2026 report, affluent investors with $1 million to $2.5 million showed the strongest ETF growth, rising 12 percentage points to 67 per cent exposure. Ultra-high-net-worth investors ($10 million to $70 million) rose 7 percentage points to 63 per cent, and emerging high-net-worth investors rose 4 percentage points to 64 per cent.

03Are all HNW wealth segments cutting property exposure, or only the wealthiest?

Not all segments cut property exposure. Netwealth found that investors with $1 million to $2.5 million actually increased residential property exposure by nearly 10 percentage points in FY26. Lindsay Coates of Netwealth said this group typically invests a greater share of overall wealth into property and is slower to shift focus.

04What happened to hybrid securities as ETF uptake rose among HNW investors?

Netwealth's 2026 report linked greater ETF uptake to a slide in hybrid securities exposure across the board, with drops ranging from 4 to 7 percentage points across wealth segments.

05What investment strategy are high-net-worth investors expected to favour in FY27?

Netwealth expects high-net-worth investors to favour a protective, wealth-preservation approach in FY27. The share of investors prioritising wealth preservation rose from 11 per cent to 20 per cent, while those seeking a balance of growth and income fell from 30 to 23 per cent, according to Netwealth's 2026 report.

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