Australia’s 2.3 million residential property investors are beginning to radically switch strategies and muscle in on new housing estates where first-home buyers have had an advantage, lenders are warning in the aftermath of Labor’s negative gearing overhaul.
After the federal government’s negative gearing ban made established investment properties unaffordable for many, and then Labor’s controversial deal with the Greens locked them out of mortgages within self-managed super funds, the only effective option left for real estate investors is buying new homes.
First-home buyers currently have a strong foothold in the new-build market, making up 40.7% of total purchasers compared to local investors at 19.9%. In the established property market, first-home buyers make up only 34.3% of purchasers.
Anthony Albanese has repeatedly said that he is happy to have negative gearers buy new homes to help boost supply.
But any pushing out of first-home buyers from the new-build market could undermine Labor’s message that its controversial budget rebalances the property landscape more in favour of young Australians trying to buy their first home.
An analysis by The Australian of tax impacts and median rents shows that buying a median-priced established property today leaves an investor more than $700 a week out of pocket, whereas a new build puts them behind by less than $215 a week after tax.
Reduced borrowing amounts
Meanwhile, lenders have dramatically reduced the amounts that investors can borrow for established properties because from July 1 next year negative gearing is only allowed for new housing.
Oracle Lending Solutions managing director Angelo Benedetti said most of his clients were multiple property owners, and in the past two weeks alone five investors who were previously adamant about buying only established properties were now examining new house and land packages. “With depreciation schedules and the long-term benefits, they’re definitely considering it,” he said.
New builds can deliver investors about $20,000 of annual depreciation deductions for a median-priced home. On top of that, other out-of-pocket costs such as loan interest, insurance and property management fees add more than $35,000 of additional annual tax deductions that are no longer allowed by Labor’s negative gearing overhaul.
“There’s definitely been a different mindset – a lot of people have been inhibited by the negative gearing changes,” Benedetti said.
He said some property investors were waiting and watching, while others were examining commercial property, which was effectively untouched by Labor’s changes.
Property tactician and JKB Property Solutions director Andrew Jackson said he had fielded many calls from investors seeking to shift their strategy to new properties since the budget. “It makes sense for people to pivot and go into builds,” he said.
Jackson said some investors still chose to buy established properties because “they think the changes will probably change again within the next couple of years, similar to what happened with negative gearing in the 1980s under Paul Keating (which were later reversed)”.
“Other people are saying they’re not going to invest in property, and will just invest in share funds, but the last time I checked nobody can live in a share fund,” he said.
Jackson’s business focuses on new investment property builds in Queensland, South Australia, Western Australia and Victoria, and he said he could not envisage property prices falling sharply.
“I think they might stagnate for six months and then will just plough ahead again,” he said. “While demand keeps outstripping supply, and we’re not doing anything to really help supply, and we keep pushing demand by importing people into the country, I can’t see that changing at all.”
Amid fears of first-home buyers losing out on new builds and facing negative equity in a tumbling market, Housing Minister Clare O’Neil will tout that the 5% deposit scheme has now helped more than 50,000 key workers – like teachers or police – to own homes for the first time.
The Labor government expanded the Morrison-era First Home Buyer Guarantee, which allowed prospective first-time buyers to get a loan with just 5% of the purchase value, instead of the usual 10%.
“Fifty thousand key workers now own a home because this Albanese Labor government backed them in,” O’Neil said. “These are the Australians who teach our children, care for our loved ones and keep our communities safe. They shouldn’t be locked out of the communities they serve, and under Labor, they’ll get the support they deserve.
“For too long, aspiring homeowners were forced to compete against investors with one hand tied behind their back. We’re changing that by making sure first-home buyers and investors compete on a level playing field.”
More demand for new builds
As attention turns to the new build market, property investment academic and author Peter Koulizos said a lot of landlords were still waiting for the dust to settle “but there will be many investors attracted to new property”.
First-home buyers would be impacted negatively by rising prices as investors push up demand for new builds, he said.
“New properties will increase in price, and the advantage that investors have is that the rent will help them pay off the mortgage,” Koulizos said.
FIFO worker Mouhsen Aki is preparing to sell his Perth home and reinvest the proceeds into a new build in Melbourne to reap negative gearing benefits.
The 50-year-old South Morang father, who holds three properties and is now eyeing a new build, says he is struggling to set up a retirement plan while leaving money for his children.
“You can’t negative gear (on an established property) anymore, and that’s another thing that they’ve taken away – you can’t use your self-managed super fund to purchase property anymore. It’s crazy,” he said “I’ve been earning good money working hard for 30 years, and I still can’t see a way out where I can have a good retirement and still set the kids up. What’s happened to the Australian dream?”
Focus Property Group, which specialises in new-build investment, recorded a 46% surge in inquiries since the budget, driven largely by referrals from finance brokers, accountants and financial planners whose clients had been planning to buy established homes.
Swift and decisive shift
Managing director Andre Knott said the shift had been swift and decisive in redirecting investor demand.
“The conversation has moved from ‘Should I invest?’ to ‘What’s the smartest way to invest under the new rules?’” he said, warning that the flood of investors into new housing estates was already placing first-home buyers under greater pressure.
“First-home buyers are increasingly competing against investors for the same stock. Unless housing supply increases significantly, that competition is only likely to intensify.”
Property Investment Professionals of Australia chair Cate Bakos said she was seeing prospective property investors consider other asset classes and real estate options “including switching to a mindset of storing more wealth in the family home by targeting extension or renovation”.
“I’ve seen a flood of investors wanting to take advantage of the tight window to secure a SMSF property, but unless your fund is already established, the time frame is too restrictive for most,” she said.
While property specialists say nobody should invest purely for tax deductions, the tax penalties facing new investors under the new regime effectively price many of them out of purchasing established property.
“Only a very tiny percentage of people have an appetite for property investment now … lenders have adjusted their servicing calculators as well,” Bakos said.
“An investor’s borrowing capacity for an established property has significantly changed,” she said. “For most of them, it’s not feasible to even buy a property – I had one who had a borrowing capacity of $800,000 and suddenly it’s reduced to $500,000.
“Lenders don’t calculate negative gearing now when assessing a borrower’s ability to repay a loan.”
Bakos, who runs Melbourne buyer’s agency Cate Bakos Property, said the disappearance of most investors had meant “my business has completely changed overnight”.
“It was always 50-50 (owner-occupiers and investors) and now it’s less than 10 per cent,” she said.
However, first-home buyers were not taking up the slack, Bakos said.
Originally Published : Anthony Keane and Noah Yim | The Australian | 16 July 2026
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