New build market set to benefit following the biggest tax shake up in recent history
While the dust has somewhat settled on last month's Federal Budget, market response has been mixed – with many criticising the changes will dampen an already stuttering residential market, in the wake of rising interest rates. Newly built housing emerges as a clear winner, supported by retained tax concessions and government funding to increase housebuilding. And opportunities remain for buyers willing to adapt, as we unpick the parts of the market likely to outperform in response to the changes.
IN CASE YOU MISSED IT: THE KEY BUDGET CHANGES FOR THE HOUSING MARKET
Negative Gearing – Investment properties (excluding new build) running at a net loss can no longer be offset against income tax, from 1st July 2027. Established properties purchased prior to 12th May 2026 can continue to be negatively geared.
Capital Gains Tax – The flat 50% CGT discount (applied to a seller’s marginal tax rate) on assets held for over 12 month's will be scrapped, from 1st July 2027. It will be replaced with a 30% minimum tax on gains made above inflation, rising to marginal income tax levels for higher earners. New build purchasers can opt to keep the 50% CGT discount, or choose the new model at point of sale, depending on which produces a better tax outcome.
The designed impact of these two key changes is to make property investment into established property less attractive overall, with the government aiming to level the playing field between first time buyers and investors, while supporting their ambition to build 1.2 million homes over the next 5 years.
BURIED IN THE BUDGET: OTHER INFLUENTIAL CHANGES FOR THE MARKET
Overseas Purchasers – Exclusion from the established property market has been extended to June 2029, while purchases remain permitted on new build properties, or where development will increase housing supply.
Family Trusts – Discretionary trusts – typically used by high net worth families, will no longer be able to benefit from income splitting, with a minimum 30% tax on trust income to come into effect from July 2028.
Support for Supply - $2 billion new funding package for infrastructure to enable the roads and utilities that are foundational to new housing projects - will help unlock up to 65,000 homes over a decade. A further $5.9 billion will be available to states and territories as part of the 100,000 Homes for First Home Buyers program. $85.2 million to fast-track certification for overseas trades people to work in Australia, with a $10,000 incentive for apprentices entering the industry.
LIKELY MARKET IMPACT AND OPPORTUNITIES
MARKET MONITOR: MELBOURNE
One thing the budget does deliver is clarity – and motivated buyers now have the details required to make an informed choice. One market to watch is Melbourne. While the Victorian capital has faced a challenging period with weaker price performance and heavier tax burdens, improved relative affordability and strong rental fundamentals is now making the city an attractive option for first time buyers and investors. Median unit prices are around 30% lower than Sydney or Brisbane, and with a strong pipeline of new build projects coming to market, buyers ahead of the curve will benefit from both choice and ability to retain negative gearing and CGT discounts on investment properties. Michael Lang, Head of Residential Projects in Victoria, noted an uptick in enquiries and offers following the budget announcements, with new investors benefiting from gross yields close to 5%.