The Australian property market is facing its biggest tax shake-up in a generation, with the 2026–27 Federal Budget ushering in sweeping changes. While much of the debate has focused on residential investors, the reforms have major implications for developers. From changes to negative gearing and capital gains tax, to infrastructure investment and planning reforms, here’s what the new policy landscape could mean for investor demand, project feasibility and the pipeline of new housing.
1. New housing could capture larger share of investor demand
Developers delivering new stock may benefit from stronger investor interest as changes to negative gearing take effect. From 1 July 2027, investors who buy established residential property after 7:30 pm on 12 May 2026 will no longer be able to use rental losses to reduce their other taxable income, such as salary. Instead, those losses will be carried forward to offset future income from residential property. Eligible new builds will not be subject to the same restriction. The policy is designed to steer investment towards new housing supply rather than established stock. For developers, the changes could strengthen demand for apartments, townhouses and house-and-land projects.
2. CGT changes add another variable for developers
Changes to capital gains tax could also influence investment decisions and project timing. The reforms will change how capital gains are treated, potentially prompting developers, landowners and investors to reassess decisions around acquiring, holding and selling property. For developers, the impact will depend on the nature and timing of individual projects, particularly those involving long development timelines and extended holding periods. The changes could also influence landowners’ decisions about whether to sell, hold or develop sites, with potential implications for the availability of development land.
3. Infrastructure funding could help unlock development corridors
The Federal Government is also targeting one of the biggest barriers to new housing: infrastructure. A new $2 billion Local Infrastructure Fund will help finance the roads, drainage, water, wastewater and electricity connections needed to support new housing. The impact will depend on where funding is allocated and how quickly projects are delivered. But for developers with land in infrastructure-constrained areas, funding decisions could influence project timing and development feasibility.
4. State taxes continue to shape development feasibility
Federal tax changes may encourage investment in new housing, but state-based taxes will continue to influence development feasibility. In Victoria, for example, the Windfall Gains Tax can add significant costs to land that increases in value following certain government rezoning decisions. For developers and landowners, the tax is another factor to consider when assessing the viability of sites where rezoning is required to unlock development potential.
Outlook: Redirection, not retreat
The new tax settings could redirect some investor demand towards new housing, potentially boosting demand for apartments, townhouses and house-and-land projects. But tax is only one part of the development equation. Land and construction costs, planning delays, infrastructure availability and state taxes will continue to determine which projects stack up. Developers who understand how the reforms could affect investor behaviour, land acquisition and project feasibility will be best placed to respond as the market adjusts over the next 12 to 24 months.
