Investors moving quickly into brand-new and off-the-plan property in an effort to retain negative gearing and capital gains tax advantages are being urged to slow down and reassess their approach, with industry specialists warning that shortcuts in research are exposing buyers to avoidable financial risk.
Access Wealth Managing Director and Founder Dory Senior said recent shifts following the Federal Budget had fuelled a growing assumption that new-build properties offer a guaranteed outcome for investors trying to navigate tax changes.
“The risk isn’t in buying new. It’s in buying new without doing the groundwork,” Mr Senior said. “When people chase negative gearing without understanding the fundamentals, that’s when they get caught out.”
He said recent failures involving buyer’s agency operators, including firms that collected large sums in prepaid fees before collapsing, should prompt investors to consider the quality and accountability of advice they are receiving.
“When businesses prioritise sales over delivery, consumers get hurt,” he said. “The same conditions that allowed that to happen are re-emerging in the new-build sector given the property tax reforms.”
According to Mr Senior, some investors are entering contracts without a clear understanding of builder insurance limits, construction timelines, pricing structures, or the distinction between full-turnkey and partial-turnkey arrangements.
“We’ve seen people handed a property with no driveway, no landscaping, or no blinds because they didn’t know what to look for,” he said.
He said many of the issues stem from investors skipping the basic sequence of decision-making and focusing on the property itself before working through their personal position, financial capacity, and the builder’s credibility.
“If you don’t work through those steps in order, you’re relying on luck, which is never a sound strategy,” he said.
The starting point, he said, should always be clarity around goals. Without this, investors risk choosing assets that do not align with their long-term intentions.
“If you don’t know whether you’re investing for retirement, income, or to pay off your home faster, you can’t judge whether a property is fit for purpose and that’s where poor decisions start,” he said.
The second stage is assessing financial capacity, which Mr Senior said has become more constrained since recent policy changes.
“Your borrowing capacity, equity position, and weekly affordability matter far more than any retained tax benefit,” he said. “Banks removing negative gearing add-backs for established properties is already cutting borrowing capacity by $150,000 to $200,000 for some investors.”
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He said understanding the full cost of holding a property is critical before any commitment is made. This includes allowing for vacancy periods, interest rate fluctuations, council charges, insurance, management fees and maintenance.
“We don’t model properties on best-case scenarios,” he said. “We deliberately stress-test the numbers, which means we overestimate costs, build in vacancy buffers, assume higher interest rates, and allow for council rates, water rates, insurance, property management fees and maintenance, even where the property is brand new.”
He said his approach also includes a conservative allowance for maintenance and cautious rental assumptions to ensure investors are not relying on optimistic projections.
“The point is not to make the numbers look pretty,” he said. “The point is to understand whether the client can comfortably hold the asset if things are not perfect.”
Depending on income, tax position and lending structure, he said conservative modelling often indicates holding costs of around $300 per week after buffers are applied. With current rental conditions and interest rates factored in, that figure can fall below $200 per week in some cases, particularly where investors contribute additional equity.
“For many investors, once you model the property properly, the question becomes much clearer,” he said. “Even if the property costs $50,000 to $60,000 to hold over 15 years, the real question is whether you believe a well-selected property in a high-growth location can grow by more than that over the same period. If you don’t think it will, then don’t invest.”
Mr Senior said investors should avoid building strategies around the expectation of falling interest rates, although rate cycles remain an important factor in long-term affordability.
“Rates move in cycles so investors should never build a strategy on the hope that rates will fall, however, if lending rates normalise over time, the weekly holding costs can reduce significantly,” he said.
The third stage of evaluation, he said, is where many investors are most vulnerable to poor decisions. This is where marketing material and location hype can overshadow fundamentals.
“People jump straight to the suburb or the glossy brochure, but if the fundamentals aren’t there such as population growth, infrastructure and rental demand the property simply won’t perform,” he said.
He pointed to growth corridors in Southeast Queensland including Ipswich, Logan and Moreton Bay, along with areas such as Melton and Greater Geelong in Victoria, as examples of regions attracting attention due to population growth and infrastructure investment.
“These locations still need to be assessed property by property,” he said. “Population growth alone does not make a good investment, but when strong population growth, infrastructure, affordability, rental demand and the right dwelling type come together, that is where new-build property can become a very powerful long-term strategy.”
The final stage, he said, involves close scrutiny of the builder, contract structure and inclusions.
“This is where the biggest risks sit in the new-build sector,” Mr Senior said. “You need to know the builder’s track record, their insurance limits, their pipeline of existing work and whether the contract is genuinely fixed-price and full-turnkey.”
Without that level of checking, investors can face delays, unexpected costs, or properties delivered without basic inclusions.
Mr Senior said new builds can offer affordability advantages, with modelling suggesting a material difference in holding costs compared with established housing following recent tax settings.
However, he said affordability alone should not be used as a deciding factor.
“New builds can be incredibly powerful, but only when they’re chosen through a structured process,” he said. “There is no magic bullet. There is only due diligence.”
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