Off-the-Plan Property and Negative Gearing: Why the Investment Case Hasn't Changed

The short answer: Off-the-plan apartments and house and land packages rarely make investment-grade purchases, and the 2026 negative gearing changes do not alter that. They are usually built where land is cheap rather than where demand is strongest, carry developer, builder and marketing margins, and often value below the purchase price at completion. If a purchase only works because of the tax treatment, it is not a good enough asset.

I have never been a strong advocate for off-the-plan apartments or house and land packages as investment strategies. The negative gearing changes announced this week haven't moved that position.

36 hours post the federal budget announcement and my inbox, LinkedIn messages and phone were flooded. These approaches happen from time to time - referral fees ranging from $10,000 to $30,000, paid by the developer for every client who purchases their product.

To be clear: my clients pay me to represent them independently on their behalf. My job is to act in their interest alone. Accepting payment from a developer to recommend their product to those same clients is the total opposite.

The volume since May 12 2026 tells you everything about what this policy change has already become.

Here is why it rarely works as an investment grade purchase.

Off-the-plan apartments and house and land packages are typically built where land is cheap and development is viable, not where demand is strongest. Surrounded by identical stock, competing for the same tenants, in locations that lack the scarcity and owner-occupier demand that drives long term capital growth.

By the time a new build reaches you, every party in the chain has taken their margin. The developer. The builder. The sales and marketing team. None of those margins show up in the contract. None of them help your valuation.

Most off-the-plan purchases require a deposit upfront while the project completes. With the average apartment taking over two years to build, your capital can sit idle for that entire period. In the same time, established markets continue to move.

When the bank values the property at completion, they value it at true market value, what a buyer would independently pay for that asset on that day. In most cases, that number is lower than what you paid. You are carrying a loss before you have collected a single rent payment. Not because the market went backwards. Because you overpaid on day one.

If the bank values your property below your purchase price at completion, you may be required to contribute additional capital to settle, sometimes capital you don't have. A negative gearing benefit of a few thousand dollars a year does not offset $50,000 to $100,000 in equity frozen in an asset that hasn't moved.

With negative gearing now only applicable to new builds, the pitch will sound more compelling than ever. But the underlying investment argument hasn't changed.

Developers don't build because a tax treatment exists. They build when demand, margins, and feasibility support it. The bottleneck in Australian housing supply has never been investor appetite for new builds. It is planning approvals, zoning constraints, and infrastructure sequencing.

Construction costs have risen sharply since 2020 and show no signs of easing. Inflation is putting further pressure on build costs at exactly the wrong time. Builder insolvencies have been at record levels. Fixed price contracts are increasingly rare. The policy change creates the incentive. It doesn't remove the construction risk sitting underneath it.

There is a difference between a developer selling you a product and a deliberate, privately funded new build or development project that fits within a broader portfolio plan. Where those have a role, it is because the strategy justified them, not the tax treatment.

If the decision only works because of the policy change, it isn't a good enough asset.

Frequently asked questions

Are off-the-plan properties a good investment?

Rarely, in our view. They often sit among identical stock with weaker scarcity and owner-occupier demand, and margins along the chain inflate the price you pay.

What happens if an off-the-plan property values low at completion?

You may need to contribute extra capital to settle. A few thousand dollars a year in tax benefit does not offset $50,000 to $100,000 of equity tied up in an asset that has not moved.

Does The Nelis Group take developer referral fees?

No. Developers offer referral fees of $10,000 to $30,000 per buyer, but our clients pay us to represent them independently, so we do not accept them.

Disclaimer: The information in this article is general in nature and does not take into account your personal objectives, financial situation, or needs. It is not financial, legal, or tax advice. The Nelis Group accepts no liability for actions taken based on this content. You should seek independent advice from a relevant licensed professional before making any decisions and always confirm the latest rules and thresholds with your state revenue office or relevant authority.

Note: The negative gearing changes referenced in this article were announced in the Federal Budget on 13 May 2026. They were not yet law when this article was published and have since passed. Confirm how the final rules apply to you with your accountant or tax adviser.