Investor activity in new builds is increasing and first home buyers are dropping off as purchasers come to terms with the Albanese government’s changes to property tax discounts.
Data from property fund manager Oliver Hume shows the proportion of new-build sales to investors in Victoria has risen above 40 per cent for the first time since December 2024, while the share of first home buyer sales decreased from 66.7 per cent in April to 54.9 per cent in June.
The fund manager, which sells house and land packages, has also seen an increase in new-build investors in South Australia, while other major builders and developers say they have seen a big increase in investor inquiries nationally since the budget.
“We have a pretty strong expectation that the budget taxation changes will mean a bit of a structural change in terms of where property investors will be looking [to buy],” said Oliver Hume chief economist Matt Bell.
“We have a firm belief that some proportion of those [investors] are going to be filtered to the new [home] market.”
Labor’s changes allow investors in new builds to retain access to the old CGT and negative gearing regime in the hope of encouraging more housing development, which economists widely agree is needed to improve supply and affordability.
Experts say investors will probably switch to new units or houses on the outer city fringes, while suburbs in the middle of cities could experience a decrease in stock, potentially resulting in higher rents in those areas.
Bell predicted that investor land sales for its projects across the country would increase about 10 per cent, which could lead to owner occupiers increasingly competing for homes.
“In a market where … you can’t get product to market because of water restrictions or infrastructure or approval hold-ups, then those investors can potentially square out owner occupiers,” he said.
Overall, demand for home loans nationally dropped 14 per cent in June, and new mortgages from first home buyers are dropping even faster, amid concerns about high interest rates and lack of affordability.
Sydney’s median house price has fallen 1.5 per cent, or $23,500, to $1.56 million from May to the end of June according to Cotality data. Melbourne’s median is down 1.3 per cent, or $12,000, to $948,400. Canberra’s prices have just started to fall, with the city’s median down 0.7 per cent, or $7600, to $1.035 million. Other cities are yet to record price falls.
In the weeks after the budget changes, auction clearance rates, an indicator of buyer confidence, slipped to levels worse than during the pandemic.
While buyers are holding back, ASX-listed homebuilder Simonds said it recorded a 76 per cent surge in national house and land inquiries from investors since mid-May, indicating investors will come back to the market to purchase new builds.
“This is something that’s exciting for us because there’s lots of growth,” said Simonds chief sales and marketing officer Shaun Patterson.
“Investors have always been very active in the new builds. It’s been a massive shift since that middle of May, and that’s the real opportunity for us as builders.”
Brian Farrelly, a partner at accounting firm Pitcher Partners, said he had received many inquiries from clients, who included property developers and builders, about how they could best explain the property tax changes to their customers.
“There’s been a lot of inquiry, just trying to support those developers in managing client inquiries because they’re certainly advising us that they are receiving plenty of questions in relation to investing in their projects,” said Farrelly.
“You have to appreciate that this is but one part of the package that came through under the federal budget, and the other part being the minimum tax for trusts.
“There’s clearly an overlay there with respect to investors, and their structures as well, as to how best to hold their investment property and their assets going forward.”
Investors like Michael Pell and Karen Lacheta-Pell are turning their attention to properties they can continue to negatively gear, such as building new homes on vacant land.
They plan to build two duplexes on a block of land they acquired in Queensland’s Moreton Bay region then lease them out.
“People need to understand that buying an established property, yes, the tax benefit has gone, but you can still get the tax benefits by building in the right area,” said Pell, managing director of property investment firm Propell Property.
“You can still get good capital uplift, good rental return, and the tax deductions to help you be able to hold it.”
The couple’s Morayfield landholding adds to their seven-asset portfolio of properties in Queensland and NSW, building on their long-term strategy of using property to build wealth.
Source: Property investors shift to new builds as first home buyers drop off, Sarah Petty for the Financial Review.