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The Federal Budget could change how Aussies invest
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Why Zagga thinks income is more attractive than ever
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How investors can access property differently
Special Report: The Federal Budget may have done something decades of market volatility couldn’t – make Australian property investors think twice about chasing growth.
For decades, the Australian investor playbook has been remarkably simple.
Buy property. Hold it. Let time, population growth and a generous tax system do the heavy lifting.
That formula has survived recessions, rate cycles, banking crises and political changes. It has become so deeply embedded in the Australian psyche that property ownership is often viewed less as an investment strategy and more as a national pastime.
But according to Zagga CEO and Co-Founder, Alan Greenstein, whose firm specialises in funding residential property projects through private capital, the Federal Budget may have introduced something the market has not seen in a very long time.
A genuine reason for investors to rethink the balance between chasing capital growth and generating income.
At the centre of the debate are proposed changes that would reduce capital gains tax concessions, wind back negative gearing incentives and increase tax on certain trust structures — measures that have long shaped how many Australians invest in property.
And that could have significant implications not only for investors, but for developers, housing supply and the growing real estate private credit sector.
When the old rules start changing
The question is not necessarily whether the proposed changes are good or bad policy.
For Greenstein, the bigger issue is that some of Australia’s most established investment assumptions are suddenly being challenged.
“I think what is controversial about the budget is that it’s a significant change in tax policy, probably the most significant change in tax policy since 1984,” Greenstein said.
Without taking a political position, he notes that proposed changes around CGT and negative gearing strike directly at areas many Australians have long considered untouchable.
That alone is enough to force investors back to the drawing board.
The logic is straightforward. If future capital gains become less attractive after tax, the incentive to pursue growth-focused investments naturally weakens.
“I think inevitably it must influence a move towards income,” Greenstein said.
“Because the benefits that you had before the budget in order to accumulate capital are now being diminished.”
That does not mean growth investing disappears. Far from it. But it does mean investors may begin asking a different question.
Instead of focusing purely on what an asset might be worth in 10 years, they may increasingly focus on what it can pay them next month.
The rise of income investing
That shift arrives at an interesting moment.
Markets remain volatile. Geopolitical tensions continue to flare. And investors are navigating everything from inflation and interest rate uncertainty to concerns about global growth.
Against that backdrop, income-producing assets are attracting renewed attention.
Private credit sits squarely in that camp.
Unlike equities or property purchased primarily for capital appreciation, private credit is fundamentally a debt instrument.
Its returns come from income rather than future asset price growth.
“Debt instruments don’t attract CGT. They are classically income instruments,” said Greenstein.
That distinction becomes increasingly important if investors believe the tax treatment of capital gains is becoming less favourable.
For self-managed super funds (SMSF) in particular, Greenstein believes the comparison may become more compelling.
To many SMSF investors, the attraction is not simply yield. It is predictability.
While listed markets can swing wildly on sentiment, private credit returns are typically linked to contractual loan agreements.
As Greenstein puts it, “the price of the share on the share market is largely driven by sentiment rather than mathematics.”
By contrast, private credit investors generally know the loan-to-value ratio, the expected return and the anticipated repayment timeframe before investing.
Property isn’t going away. The pathway might.
Importantly, Greenstein does not believe Australians are about to fall out of love with property. Not even close.
“Everybody wants to own their own home,” he said.
That reality is unlikely to change, particularly while Australia remains short of housing.
Current estimates suggest the country faces a shortage approaching one million homes. That structural imbalance continues to underpin demand.
So, the question is not whether people still want property exposure. The question is how they choose to access it.
If tax settings make direct ownership less attractive, some investors may start looking beyond traditional brick-and-mortar investment and toward alternative forms of property exposure.
One option is real estate private credit.
Rather than owning the property itself, investors effectively provide the capital that allows developers to build housing.
The exposure remains linked to the residential market, but the return profile shifts from capital growth to income generation.
“What you’re really doing when you’re investing in real estate private credit is you’re funding that developer to build a property which an end user is going to be able to buy and enjoy,” Greenstein said.
“You are therefore still participating in helping to diminish the shortage of residential accommodation that we have in Australia.”
As Greenstein puts it, “It’s an indirect way of investing in property – through the financing of real assets, rather than ownership of the bricks and mortar.”
The housing shortage isn’t going anywhere
The budget still needs to make its way through Parliament, and even then there is no guarantee the final legislation will look exactly as it does today.
That uncertainty is important because markets dislike standing on shifting ground.
Developers may delay projects until there is greater clarity around feasibility and returns, investors may postpone decisions while they reassess tax implications. Financial advisers, meanwhile, are likely to encourage caution until the picture becomes clearer.
“I think that it’s the uncertainty that is the biggest issue,” Greenstein said.
But the irony, according to Greenstein, is that policy changes designed to reshape investment behaviour may create unintended consequences elsewhere.
One possibility is that investors become less willing to sell existing assets.
Another is that developers find it harder to acquire land at prices that make projects commercially viable.
“If you are one of those sellers who’s going to be impacted by a change to the tax, you may wait and see if maybe that change will go away in a year or two years’ time, you may be less inclined to sell today,” Greenstein said.
That creates a challenging dynamic because Australia remains desperately short of housing.
“For specialist real estate private credit managers, the fundamentals of the Australian residential market remain extremely attractive. We are funding into a housing shortage, with government policy bolstering the pipeline of new-build projects. For us, this drives greater deal flow and more investment opportunities, but the challenge lies in finding the right project that stands up in this new environment.”
Why manager selection matters more than ever
For Zagga, the broader opportunity lies not in politics but in portfolio construction.
The company has now written more than $3 billion in loans and repaid more than $1.5bn to investors. Its investor base spans sophisticated individuals, SMSFs, family offices and offshore capital providers.
Greenstein argues that real estate private credit is not about replacing every other asset class.
It is about playing a specific role inside a diversified portfolio. A role centred on income, diversification and lower correlation to listed market volatility.
Many of Zagga’s investors, particularly SMSFs and high-net-worth individuals, have increasingly gravitated toward Zagga’s diversified fund structures that provide exposure across multiple loans rather than single-project investments.
In Greenstein’s view, the attraction is not simply the return itself, but the combination of income, diversification and greater certainty around outcomes.
“I always say you’ve got to ride the jockey, not the horse,” Greenstein said.
“A good jockey can win on a bad horse, but a bad jockey will never win even on a good horse.”
Whatever ultimately emerges from Parliament, he believes the fundamentals remain unchanged.
Australia still needs more homes, developers still need funding.
“And people still have money that they need to invest, people still have homes that they need to buy.
“There’s still a housing shortage that needs to be filled, and all of that is going to outlast not only this budget but many more budgets to come.”
Now read more: Not all private credit is created equal: here’s why that matters
This article was developed in collaboration with Zagga, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.