Should You Buy a Brand-New Property Just for the Tax Break? Let's Do the Maths

A mortgage broker explains, in plain English, why the 2027 tax rules don't make new builds an automatic win.

The quick version

From 1 July 2027, the government is changing the rules. If you buy an established (older) home as an investment, you'll lose the tax perk called negative gearing. But if you buy a brand-new property, you keep it.

So everyone's asking me: "Should I just buy new, then?"

My answer: not so fast. A tax break is nice. But if you buy a bad property to get it, you can lose far more money than you save. Let me show you with real numbers.

First, what is negative gearing (in plain words)?

When your rental property costs more to hold than it earns in rent, you make a loss. Negative gearing lets you subtract that loss from your salary, so you pay less tax.

Simple example:

• Rent you receive: $25,000/year

• Costs (interest, rates, repairs): $35,000/year

• Loss: $10,000

If you earn $150,000 salary, you're taxed at about 37c in the dollar. So that $10,000 loss saves you roughly $3,700 in tax each year. After 2027, you only get that saving on new builds — not older homes.

That's the carrot. Now the catch.

The number that matters most: capital growth

Tax savings are small. Capital growth (how much the property goes up in value) is where real wealth is made. And here's the problem — older homes have tended to grow faster than new ones.

Worked example (10 years, simple maths):

Established home — value $700,000, grows 6% a year

• After 10 years, it's worth about $1,253,000

• Growth = $553,000

New build — same $700,000, grows 3% a year

• After 10 years, it's worth about $941,000

• Growth = $241,000

Difference in growth: about $312,000.

Now add up 10 years of the extra tax break on the new build — say $3,700 a year = $37,000.

Even after that tax bonus, the older home is still hundreds of thousands ahead. This isn't just my maths — 2026 studies found established property delivered roughly $100,000 to $293,000 more over a decade than a comparable new build, because growth beat the deductions.

The lesson: a $37,000 tax saving is no good if it costs you $300,000 in missed growth.

The trap that catches buyers: the "valuation shortfall"

When you buy a new apartment "off the plan," you sign a price today but don't settle (pay) until it's built — often 1.5 to 3 years later. The danger: the bank values it at settlement, and only lends against that value, not your contract price.

Example:

• You sign a contract for $750,000

• Two years later the building is finished

• The bank's valuer says it's only worth $680,000

• The bank lends 80% of $680,000 = $544,000

• But you still owe the developer $750,000

You must now find the $70,000 gap in cash — or you lose your deposit and get sued. In weak or oversupplied markets, these gaps of 5%–15% are common.

Three more risks in plain English

1. Oversupply. The government wants more building, so lots of similar apartments get built at once. Too many for sale in one spot = prices and rents get pushed down.

2. Builders going broke. In 2026, many builders faced money trouble, delays and rising costs. Your cash can be stuck for years with no rent coming in.

3. The "new" premium. Just like a new car, a new build often drops in value once it's no longer brand new — because you paid extra for that shiny finish.

So how do you use the tax break sensibly?

• Buy the property first, the tax break second. Do the maths with the tax saving removed. If it still looks good, buy it. If it only works because of the tax, walk away.

• Keep a cash buffer. Set aside 10–15% of the price in case the valuation comes in low at settlement.

• Check what's being built nearby. Look at your local council's website for approved developments before you sign.

• Get finance checked early, not at settlement — lending rules can tighten while you wait.

The bottom line

Yes, new builds keep the tax perk after 2027. But the numbers say a well-chosen older property often makes you far more money — because growth beats deductions almost every time.

Treat the tax break as a small bonus, never the reason. Don't chase a $3,700 saving into a $300,000 mistake.

Tanuj Kapoor | Mortgage Broker | Jabsons Finance

Ex-Senior Manager QA & Automation | MBA | B.E. (Comp Sci)

Tanuj Kapoor is a credit representative (557159) of BLSSA Pty Ltd ACN 117 651 760 | Australian Credit Licence 391237.

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 personal advice, credit advice, tax advice or legal advice, and is not a recommendation to enter into, refinance, or remain in any particular credit contract. Any figures, calculations, or projections shown are simplified examples for illustration only — they are not guarantees or forecasts, and actual outcomes will vary based on your circumstances and the lender's assessment. Before acting on any information here, you should consider whether it's appropriate for you and seek advice from a licensed mortgage broker, financial adviser, tax adviser, and/or solicitor. Lending policies, interest rates, and tax laws change over time and vary between lenders and states — always confirm current details before making a decision.