Checks before building an investment property

The budget has pushed new builds onto investors’ lists, and PIPA Vice Chair Richard Crabb told News Corp that the tax treatment should not be the sole reason for the purchase.

What the article covered

Kate McIntyre’s feature for News Corp examined new builds as an investment after the federal budget changed the tax treatment of property. It was published in seven News Corp regional mastheads on the 8th of August 2026. With negative gearing now directed to newly built dwellings, the article noted that new developments are on more investors’ lists, and that tax benefits do not by themselves make a sound investment.

Michael Pell, managing director of Propell Property, set out the concerns his research found most common among investors considering a build: cost overruns, builder failure and delays to completion.

The PIPA view

Richard Crabb, Vice Chair of PIPA and chief executive of ASPIRE Property Advisor Network, said that the fundamentals of property investment do not change when the property is new. He pointed to location, a shortage of housing with strong demand, economic growth and a high proportion of owner-occupiers, and said that buying for tax benefits alone should be avoided.

Get the strategy right and understand that first. Make sure you’re looking at understanding the fundamentals of the location, the asset and how that’s going to achieve what you want for your strategy.

Richard Crabb, Vice Chair of PIPA, quoted by News Corp, the 8th of August 2026

He also advised reading the building contract closely for inclusions, since the buyer cannot walk through a property that does not yet exist. He cautioned against the lowest cost finishes, such as laminate benchtops and low ceilings, because of their effect on resale value. Both he and Mr Pell advised against judging a builder by its display home, which is usually the highest specification on offer, and recommended inspecting completed builds instead.

What the tax change does and does not alter

A tax deduction reduces the cost of holding a property. It does not change the price the property will sell for, the rent it will achieve, or the number of comparable properties competing with it for tenants and buyers. An investor who pays a premium for a new dwelling because it attracts the deduction needs the property’s own performance to recover that premium.

Mr Pell advised against estates where oversupply is an issue. On a new estate, the investor’s property is often one of many similar dwellings completed in the same period, which can hold rents down during leasing and prices down on resale.

Building contract terms

Several of the risks raised in the article are governed by the contract signed before construction begins.

• Provisional sums. Mr Pell described these as the point at which buyers are most often caught out. A provisional sum is an allowance for work not yet priced, and the final cost can exceed it. A fixed price contract with provisional sums removed, or kept to a minimum and itemised, moves that risk back to the builder.
• Inclusions. The specification list determines what is delivered. Items shown in marketing material but absent from the contract schedule are not part of the purchase.
• Builder standing. The article recommended a builder with a record of completing on time and sound finances. Licence status and any history of disputes can be checked with the building regulator in the relevant state.
• Warranties. Mr Crabb noted that the structural guarantee should be set out in the building contract. Statutory warranty periods and home building insurance requirements differ between states, so the contract should be read against the rules of the state where the property is built.
• Holding costs during construction. Interest is payable on progress payments before any rent is received, and the buffer to cover it should be arranged in advance.

Off the plan in a falling market

Mr Pell said he does not buy off the plan apartments for clients, because too much can change between contract and completion. His point that a deposit secures only the right to settle has a particular consequence in a falling market. The lender values the apartment at completion, not at contract. If that valuation is below the contract price, the buyer must fund the difference from other resources, or risk losing the deposit. For apartments in large complexes, Mr Crabb added that the buyer is also tied to the strata, and the builder’s history and the quality of the building should be established before signing.

Before signing a building contract

An investor considering a build should obtain the evidence for the location, comparable rents and resale prices for similar new dwellings, and an independent review of the building contract, before signing. Builders and developers commonly pay commissions to the people who introduce buyers, and the PIPA Code of Conduct requires any such payment to be disclosed. QPIA accredited advisers are held to that obligation, and can be found through PIPA’s adviser search.