Which properties won the federal budget?
Here are our three picks
Last Monday night, Chalmers split the Australian property market in two.
Today, we explain the three types of properties we think win from the Budget changes - and why.
First up - what actually changed
The two biggest changes were for:
1) Existing homes (bought after Budget night).
Negative gearing and the 50% CGT discount gone - from 1 July 2027.
Replaced with an inflation discount and a 30% minimum tax on the gain.
2) New builds - Untouched.
A clear directive from the government to push investor demand into new supply.
That's the whole thesis.
Our thesis has always been that “credit drives prices”
Basically, where buyers are able to borrow more, prices increase, where borrowing power falls, prices will fall.
And that’s where this post from Fund manager Chris Joye comes into play - showing how investor borrowing power is negatively impacted (up to 29.2% for the highest income earners):
We think this alone will funnel investor demand into new build properties…
Which brings us to the three winners
1. Multi-unit development sites - inner-city fringe
We think properties where you can build 3, 4, 5, or 6 townhouses on a single block.
Where the build cost per unit can be in that $500-700k range wins.
(Avoiding areas where there are apartment buildings being constructed)
The suburbs that win the most will be the ones with tight vacancy, strong demand for rentals and high yields.
Buy the land.
Build the stock and you will have a bigger pool of buyers looking to buy high yielding units that are eligible for negative gearing.
2. Duplex sites in “blue-chip” suburbs
This will be where the higher income investors look at the most.
Higher yields and less competition.
PLUS more likely to achieve capital growth where the supply of new builds is low.
A duplex site in a blue-chip postcode does three things at once.
New-build status. Gearing and CGT intact.
Genuine scarcity. No one's approving 40-unit towers in these streets.
A tenant base that can actually pay high rental yields and ultra tight vacancy rates.
3. The sleeper - Principle Place’s of Residence (PPR’s) in blue-chip areas
With the main residence CGT exemption untouched.
AND taxes on business' increasing - we think the government has setup an incentive structure for wealthy business owners to park more capital in their primary homes.
Investment property just became materially less tax-efficient as a store of wealth.
Whereas the attractiveness of tax-free PPR’s increased. (ATO)
The one place you can park serious capital and pull it out tax-free at the end.
Upgrade the PPR. Buy bigger. Renovate harder.
Watch the top end of Vaucluse, Bellevue Hill, Mosman, Toorak, South Yarra, Peppermint Grove, and Dalkeith.
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