Prime Minister Anthony Albanese’s housing tax reforms are facing investor resistance, with mortgage demand falling sharply across a major broker network.
Australian property investors are questioning tax incentives to buy new homes, with fresh lending figures exposing a sharp slowdown and buyers warned of costly valuation risks.
Loan Market Group figures show demand for new mortgage lending across its network has fallen 24 per cent since January, with investor lodgements down as much as 44 per cent in some markets.
From July 2027, federal reforms will restrict negative gearing on established investment homes bought after the May budget announcement.
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Newly built properties retain the existing treatment and the option of a 50 per cent capital gains tax discount.
But just 4.8 per cent of respondents to an annual Property Investment Professionals of Australia (PIPA) survey said the preserved benefits made them more willing to buy new housing.
More than half, 50.7 per cent, preferred established properties, while 17.3 per cent said concerns about builders, settlement delays and development locations had made them less willing to invest in new builds.
Australia’s house construction costs are 51 per cent above pre-pandemic levels, adding pressure to developers and investors as the nation works towards its 1.2 million-home target. Picture: Getty Images
PIPA chair Cate Bakos said the latest Loan Market figures suggested investors were acting on concerns previously identified in the survey.
“The Loan Market figures suggest we’re now seeing investor behaviour catch up with investor sentiment,” Ms Bakos said.
She said investors were weighing borrowing capacity, project risks, prices and future returns, not simply the tax treatment of the property.
Property Investment Professionals of Australia chair Cate Bakos said the latest lending slowdown suggested investors were beginning to act on concerns about the property market.
Prime Minister Anthony Albanese’s federal tax reforms will restrict negative gearing for certain established investment properties from July 2027, while newly built homes retain existing benefits. Picture: ABC
“The assumption that investors will seamlessly switch into new housing supply isn’t reflected in the data,” she said.
M R Advocacy founder and buyer’s advocate Madeleine Roberts said soaring construction costs were making both new townhouses in established suburbs and house-and-land packages on the fringe harder to justify.
“One of the biggest issues is valuations. They often don’t align at settlement because there’s so much built into the development cost, including all the people who make money along the way,” Ms Roberts said.
“A tax incentive might sound attractive, but it doesn’t suddenly make a poor investment a good one.”
M R Advocacy founder Madeleine Roberts said soaring construction costs were making new townhouses and house-and-land packages increasingly difficult to justify as investments.
Ms Roberts said some investors were gravitating towards cheaper, established one-bedroom apartments with stronger rental yields, rather than larger, newly built properties.
That could leave a mismatch with the larger rental homes families need.
“But a one-bedroom apartment isn’t going to house a family of four in the outer suburbs,” she said.
Berti Financial director Daniel Berti warned that lower bank valuations could force off-the-plan property buyers to find additional funds when their homes are completed.
Berti Financial director and mortgage broker Daniel Berti said lower bank valuations could leave off-the-plan buyers short of the finance they expected at settlement.
“It’s not necessarily that the banks don’t want to lend. It’s that the valuation and the loan-to-value ratio have to stack up,” Mr Berti said.
For example, if a $750,000 off-the-plan home was valued by the bank at $700,000 on completion, a buyer relying on an 80 per cent loan could need an extra $40,000 to settle, assuming the lender applied that limit to its lower valuation.
Consumer Affairs Victoria warns that falling property values and construction delays can cause problems obtaining finance for off-the-plan purchases.
Mortgage lenders assess off-the-plan properties against their valuations, which can leave buyers facing unexpected funding shortfalls if the completed home is worth less than expected.
Mr Berti said some clients were looking at commercial property instead, while others were improving homes they already owned or waiting for more certainty.
“People are pivoting,” he said.
The figures do not show a wholesale retreat from new builds. Australian Bureau of Statistics data shows investor loan commitments fell 8.6 per cent overall in the June quarter, but loans for new-home construction reached a record 8468 nationally.
Only 4.8 per cent of investors surveyed by PIPA said the preserved tax benefits made new homes more attractive, while more than half preferred established properties.
The National Housing Supply and Affordability Council says house construction costs are 51 per cent above pre-pandemic levels and expects the nation’s 1.2 million-home target to be reached in late 2030, beyond its June 2029 deadline.
The council supports the federal tax changes as an affordability measure and assesses their likely impact on housing supply as modest.
For buyers, Mr Berti said tax concessions should never outweigh the underlying financial merits of a property.
“Negative gearing has always been a nice little kicker, but it should never be the main reason you’re buying an investment property.”
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