Australian property: Relook at investment portfolio, take advantage of new builds

This article first appeared in City & Country, The Edge Malaysia Weekly on May 25, 2026 – May 31, 2026

On May 12, Australia’s Budget 2026/2027 was announced with three key housing property measures. These were changes to negative gearing, removal of the discount on capital gains tax and extending the ban on foreigners buying existing property. Property experts familiar with the Australian market weigh in on the first two changes and offer advice for what to do next.

JLL Malaysia international residential lead Chong Shu Ling says the reforms appear to be aimed at improving housing affordability and simultaneously encouraging new housing supply.

The Australian government has also committed about A$2 billion (RM5.68 billion) to building infrastructure to support the construction of up to 65,000 new homes. This may help accelerate future housing supply and support long-term residential demand.

“However, for Malaysian investors, the practical impact may be less significant compared to local Australian investors, as foreign purchasers have generally already been restricted towards buying approved new-build developments rather than established secondary market properties,” says Chong.

Meanwhile, Knight Frank Property Hub international project marketing executive director 

Adrian Yeoh says the budget’s clear preference for new housing stock aligns with what Malaysians have traditionally favoured.

“And in many ways, this is a clarifying moment rather than a disruptive one. Investors who have been sitting on the fence [to invest] may find this the nudge they need to move forward with conviction.”

According to Knight Frank Property Hub international project marketing associate director Dominic Heaton-Watson, negative gearing is a strategy that allows property investors to reduce their taxable income by deducting losses when their rental income is less than their expenses.

For properties bought after 7.30pm on May 12 (Budget day), investors will no longer be able to use this strategy from July 1, 2027. There are a few exceptions, however, with purchasing new-build property being one of them.

The 50% capital gains tax (CGT) discount, meanwhile, will be replaced with a system known as Cost-Base Indexation. This means property owners only pay tax on the profit that is above the rate of inflation since the purchase date.

“The new arrangement will apply to gains after July 1, 2027, marking a return to the pre-1999 CGT model. While it’s possible that investors receive a CGT discount exceeding 50% during times of high inflation, the discount will usually be lower using the indexation model,” Heaton-Watson explains.

Due to these shifting tax structures, the property consultants agree that Malaysian investors with existing Australian properties may want to take stock of their investments and see what they are entitled to, while potential investors should consider the opportunities available to them.

For existing investors, JLL’s Chong says this period presents an opportunity to review portfolio positioning, tax-planning strategies, financing structures and long-term holding strategies ahead of the reforms taking full effect on July 1, 2027.

“For potential investors, we believe this is a time to become more selective rather than purely speculative. Buyers should focus on quality locations with strong infrastructure and employment drivers; reputable developers; projects supported by genuine rental demand; and assets that can remain attractive over the medium to long term,” she adds.

At the same time, Chong advises investors to continue to monitor interest rates, currency movements and policy updates, as these factors will continue to influence overall market sentiment and buyer confidence.

Knight Frank’s Yeoh also believes it is the right time for property owners to go over their investment portfolio with advisers to decide the next course of action.

Chong highlights how Australia remains an attractive long-term property market for those adopting a medium to long-term investment outlook, rather than a short-term one. While market sentiment is cautious compared to previous years, opportunities are available.

“We believe the market environment is increasingly favouring well-located new developments, projects supported by infrastructure and population growth, and quality assets in cities with strong education, employment and lifestyle fundamentals,” she says.

Yeoh advises that investors look at their investment objectives, rather than time the market. “What we consistently see is that clients who buy with a clear purpose, whether it’s for a child’s education, a migration pathway or rental yield, tend to be the most satisfied with their decision over time. Our advice is always to focus on the quality of the asset and the strength of the location. Those fundamentals don’t change with Budget cycles.”

Heaton-Watson highlights that the Australian residential property market remains resilient despite the current global landscape and higher interest rates. He adds that previous cycles of uncertainty usually provided opportunities for investors.

“In relative terms, Australia’s property market offers a safe harbour for capital, and the fundamentals exist for long-term growth and wealth creation.

“If I had A$1 million to invest, where would I put it? The answer would be an apartment within an integrated master plan in the central business district fringes of Melbourne — something that stands out from the crowd, has good connectivity and offers more in terms of amenities and lifestyle provisions than a standalone building,” he notes.

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