The federal government's decision to abolish negative gearing for established residential properties purchased after 12 May 2026 was widely debated in the context of housing affordability.
For Commonwealth Bank of Australia (ASX: CBA) shareholders, however, the more important question is what it does to the bank's loan book growth.
The answer, according to several analysts, is more concerning than the initial market reaction suggested.
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The exposure is bigger than most investors realise
CBA is not just Australia's largest bank.
It also holds the largest investor mortgage book in the country.
Property investors have historically been among the most profitable mortgage customers for Australian banks.
They tend to take out interest-only loans at wider spreads, maintain better asset quality through economic cycles, and generate higher fee income than owner-occupiers.
Jarden Bank estimates that the changes could cut housing credit growth by as much as 25% as the key investor incentive is removed.
The broker named CBA as the most exposed bank among the big four given its investor loan concentration.
UBS agreed, stating that CBA and Westpac were the most exposed banks should there be a slowdown in mortgage growth.
What CBA's own economists say
CBA's own economics team published its updated housing outlook following the budget, forecasting that the negative gearing changes would reduce established dwelling prices by close to 3% relative to what they would otherwise have been.
The bank now forecasts dwelling price growth of just 3% to December 2026, down from a prior forecast of 5%.
CBA's chief economist noted that the policy impact would be most pronounced in the apartment and lower-priced segments where investor activity is highest.
The share price reaction has been volatile
CBA shares fell 8.5% in early trading the morning after the budget, hitting their largest single-day fall on record.
This compounded an already disappointing Q3 FY2026 trading update which showed flat operating income.
The shares have since bounced, recovering some of the loss as initial fears moderated and investors rotated back into the quality and defensiveness of Australia's largest bank.
But the stock still remains down over the past twelve months.
Is the damage already priced in?
The broker picture is deeply divided on whether the selloff has created a buying opportunity.
Morgans retains a sell rating on CBA shares with a price target of $119.40, stating:
FY26-28 EPS forecasts downgraded c.3-5%. Target price reduced 4% to $119.40. SELL retained, with potential total return of c.-19% at current prices (including c.3.3% dividend yield).
Macquarie carries a price target of $114, also implying meaningful downside from current levels, while Morgan Stanley reiterated its sell call with a target of $130.
Foolish takeaway
CBA is not going to stop being Australia's dominant bank because of negative gearing changes.
The changes do remove one of the most profitable and reliable sources of loan book growth the bank has enjoyed for years.
But for investors already holding CBA for income, the large dividend yield on a grossed-up basis still provides a meaningful floor.
For long-term investors willing to look past short-term noise, CBA could be an interesting option today.
