Your New Build Purchase

WHY TIMING COULD SIGNIFICANTLY IMPACT YOUR FINANCIAL POSITION

The Federal Budget has created structural advantages for new build investors, however one critical factor often overlooked is timing - when you buy can now be just as important as what you buy. With the Budget reforms redirecting tax advantages towards new builds, investors considering house and land packages or new apartments face timing considerations that could significantly impact their outcomes.

The construction timeline advantage

Here’s a scenario for illustrative purposes only that warrants consideration:

If an investor signs a contract today for a new build with a typical 12-18 month construction timeline, settlement would occur sometime between late 2027 and mid-2028.

By that point, the Budget’s tax reforms will most likely be fully operational, established property investor activity may have moderated, and those entering the market could access the tax settings that may be available under the proposed changes while competition may be at multi-year lows.

However there’s a consideration.

Treasury is forecasting 35,000 fewer homes will be built over the next decade as a direct result of these policy changes.

That supply constraint, combined with redirected investor demand towards new builds, creates a timing dynamic:

• Acting in a still elevated market may mean higher purchase prices.

• Waiting too long could result in limited stock and longer construction queues.

What the depreciation numbers actually reveal

The tax advantage of new builds extends well beyond negative gearing and CGT flexibility. Brand new properties claimed an average of $15,363 in first full year depreciation deductions, compared to $8,032 for fairly new properties and $6,249 for established properties affected by the 2017 legislation changes.

That’s more than double the tax benefit in year one alone. Over five years, the difference between purchasing a new home versus a one year old property could amount to approximately $35,000 in additional deductions.

When combined with full negative gearing access and the two potential capital gains tax calculation methods if available under the final rules, the total tax advantage could be substantial.

Here’s what creates that gap

New property owners can claim both Division 43 capital works deductions (the building structure at 2.5% annually) and Division 40 plant and equipment depreciation (removable assets such as dishwashers, air conditioners and carpets).

Established property investors who purchased after 9 May 2017 can only claim capital works deductions and any new plant and equipment assets they install themselves.

The construction reality nobody’s talking about

While the Budget structurally favours new residential construction, it doesn’t solve the industry’s underlying challenges:

• labour shortages

• material cost increases

• financing costs pushed up by inflation

• red tape and planning delays

Current construction timeframes already stretch 12-18 months for standard builds, and that’s before factoring in potential delays.

For investors, this creates both risk and opportunity. A delayed settlement could push a property into a more favourable tax environment, however it also means lost rental income and additional holding costs during the construction phase.

Builder selection becomes critical. A builder’s history on project timelines, financial stability and construction quality matters significantly. Delays can result in additional costs that could erode tax benefits.

Market dynamics worth understanding

According to some leading economists they are forecasting home prices could fall around 5% as the Government’s tax changes take effect and investor activity moderates.

ANZ economists have indicated the Budget changes are likely to put modest downward pressure on home prices over the medium term.

This creates a potential dynamic: identifying quality new build opportunities in growth corridors while prices are adjusting could mean purchasing at a relative discount while locking in tax advantages.

The Federal Government has also announced a new $2 billion infrastructure fund to support delivery of around 65,000 new homes nationwide. This suggests certain locations will receive infrastructure investment that could influence capital growth prospects.

What due diligence now involves

The traditional approach of simply ‘buying new for tax benefits’ may be insufficient. The Budget has elevated new builds structurally and that means demand patterns may shift accordingly.

Due diligence considerations now include:

• builder track record and financial stability

• realistic construction timelines with buffers for delays

• infrastructure investment planned for the area

• depreciation schedule projections specific to the property

• cash flow modelling that accounts for construction phase holding costs

The Budget has rewritten the structural dynamics, however timing entry to improve outcomes requires analysis beyond simply signing the first contract offered.

Note: These proposed changes require passage through Parliament before becoming law. While they appear likely to proceed, details may shift during the legislative process. This article was fact-checked at the time of writing on 24 May 2026, is general information only and does not constitute financial advice. Individual circumstances vary and outcomes will differ. Construction timelines are indicative only and subject to change. Property investment involves risk. You should consider whether any strategy is appropriate for your situation and seek independent professional advice, including tax, financial and legal advice, before making any investment or property decisions.

If you'd like help with assessing your personal and financial situation, as well as comparing the loans in the market to see if you're truly getting the right deal for you, then call Bob Malpass now on 0431 862 136, email bob@westhomeloans.com.au