Watch this before buying property in 2026
By: Niro Thambipillay
May 22, 2026
The 2026 federal budget has encouraged many Australians to consider brand-new investment property for its tax advantages, but a tax incentive does not automatically create a good investment. Paying a construction premium, relying on investor-only demand and waiting for promised infrastructure can weaken both capital growth and cash flow.
In this article, Niro Thambipillay explains four reasons he still prefers established property: purchase price and valuation risk, owner-occupier demand, the real negative-gearing maths, and stronger rental growth in proven locations.
TL;DR
Brand-new property can cost substantially more than a comparable established home, create a bank-valuation shortfall and produce no rent during construction. Established suburbs generally have stronger owner-occupier and tenant demand, mature infrastructure and limited supply. Niro’s view is that an investment should work through genuine capital and rental growth, with tax benefits treated as a bonus rather than the foundation.
Key Takeaways
- New property often carries a premium: a comparable $800,000 established house may cost around $900,000 new.
- Banks lend against their valuation: the buyer must cover any gap between the valuation and contract price.
- Owner-occupiers drive demand: more than 70% of Australian homes are owner-occupied.
- Tax deductions recover only part of a loss: a $50,000 loss returns $20,000 at a 40% marginal tax rate.
- Tenant demand creates lasting cash flow: established locations can deliver stronger vacancy and rent-growth outcomes.
Should You Buy Brand-New Property in 2026?
The answer should depend on the investment fundamentals, not the availability of a deduction. Niro identifies four disadvantages that can leave a new-property buyer paying more, waiting longer and receiving weaker growth than an investor who buys an established asset in a proven location.
1. New Property Can Start $100,000 Behind
A comparable established freestanding house might cost $800,000 while the brand-new equivalent costs around $900,000. The extra $100,000 reflects current construction costs rather than an immediate increase in market value. The market must first recover that premium before the investor creates equity.
The bank also values the property against comparable completed homes. If the purchase price is $900,000 but the valuation is $800,000, the lender bases its loan on the lower figure. The buyer must cover the gap through additional savings or equity.
House-and-land buyers may then wait 12 months or even two years for completion. During construction they make interest-bearing progress payments while receiving no rent. Depreciation can be available on new and some established properties, and claims can also reduce the cost base used in the eventual capital-gains-tax calculation. These trade-offs should be considered alongside the government’s housing and tax policy changes.
2. Owner-Occupiers, Not Investors, Drive Capital Growth
More than 70% of Australian homes are owner-occupied, while roughly 30% are investment properties. Families and couples compete for homes near established schools, shops, hospitals, transport, parks and employment. Investors benefit from that competition rather than creating it themselves.
Many new estates are marketed heavily to investors and built where infrastructure is still promised rather than operating. If rates rise and investors sell together, the area may lack enough owner-occupier demand to support prices. During the 13 RBA rate rises across 18 months in 2022 and 2023, investor-heavy outer estates and inner-city apartment pockets were more exposed, while many established owner-occupier suburbs remained resilient.
3. Negative Gearing Does Not Turn a Loss Into a Win
Consider a new property bought for $900,000 and sold three years later for $1 million. The investor records a $100,000 capital gain but incurs a $50,000 cash-flow loss. At a 40% marginal tax rate, the deduction returns $20,000, leaving a net $30,000 loss from holding costs.
An established property bought for $800,000 and later worth $1 million creates a $200,000 capital gain before the same broader costs, simply because the buyer did not pay the initial premium. Under the budget rules discussed in the video, losses that cannot be claimed against salary may be carried forward and applied against a future capital gain.
The transcript argues that the real-world gap can be larger because established areas often have stronger demand. The comparison could be closer to $50,000 growth for the new property against $250,000 for the established one. If a deal only works because the government refunds part of the loss, the investor should reconsider whether the property and borrowing commitment are genuinely affordable.
4. Tenants Pay for Established Convenience
Rental growth happens where tenant demand exceeds available rental supply. Tenants generally prefer locations near jobs, schools, transport, shops, cafes and an established community. Fringe estates can have unfinished infrastructure, higher vacancy and many similar rentals competing at the same time.
Niro compares two properties initially renting for $500 a week. After three years, the fringe new property might reach only $520 to $530, while the established property could reach $600 to $620. That is roughly $5,000 to $6,000 more annual rent, improving cash flow through actual income rather than a tax refund.
5. Buy Where Demand and Infrastructure Already Exist
Niro continues to favour established, already-built homes in locations with owner-occupier competition, limited property supply and strong tenant demand. These are the same signals used when choosing areas with sustainable investment fundamentals.
The Verdict: Fundamentals Matter More Than the Tax Break
The budget may change when a tax benefit is received, but it does not change what drives property wealth. Purchase price, owner-occupier demand, scarce supply, tenant competition and rent growth remain the core factors.
For investors: compare the new-build price with completed local properties, obtain valuation guidance, include construction interest and lost rent, and assess who will buy and rent the asset.
For buyers: choose a property that remains affordable and strategically sound without relying on a tax incentive. A strong asset should improve equity and cash flow over time.
Summary
- A comparable $800,000 established house may cost around $900,000 when bought brand new
- The buyer must fund any gap between the bank valuation and the contract price
- Construction can take 12 months to two years while the property produces no rent
- More than 70% of Australian homes are owner-occupied, making household demand central to growth
- A $50,000 holding loss returns only $20,000 at a 40% marginal tax rate
- Established infrastructure can support stronger tenant competition and rental growth
- The transcript’s rent example produces a $5,000 to $6,000 annual advantage for the established property
- Tax benefits should be a bonus, not the reason an investment works
Frequently Asked Questions
About the Author
Niro Thambipillay
Niro is the founder of Investment Rise, one of Australia’s most trusted property buyers agencies. He has helped hundreds of first-time investors build property portfolios and was voted one of the most trusted Real Estate entrepreneurs in the Asia Pacific region (APAC 2022). Niro is also the author of “How to Build a Property Portfolio That Pays You an Income Every Month.”
