Thinking about building or buying off the plan? Here’s what smart investors know.
More than 200,000 building approvals were issued in Australia in the year to April.
That’s 8.5% higher than the previous year, and behind that number is a quiet but growing group of investors who aren’t just buying property. They’re buying it strategically. Because for the right investor, a new build or off-the-plan purchase isn’t just a property decision. It’s a tax decision.
Why investors are paying close attention to new builds
When you purchase a newly built investment property, the tax treatment can look very different to buying an established home.
Depreciation is the big one. New properties attract significantly higher depreciation deductions than older ones on both the building itself and the fixtures and fittings inside. That depreciation reduces your taxable income every year, which is the engine behind negative gearing working at its most effective.
Add to that the Capital Gains Tax discount available when you hold a property for more than 12 months, and the numbers can stack up in ways that established properties simply can’t match.
This is why so many investors are looking seriously at off-the-plan purchases right now particularly with supply still running below the government’s own targets and long-term demand showing no signs of easing.
How construction finance actually works
Construction loans are structured differently to standard home loans and that surprises a lot of first time investors.
Rather than receiving the full loan amount upfront, funds are released in stages as the build progresses — typically across five milestones:
Slab or foundation
Frame
Lock-up
Fit-out
Completion
During construction you generally pay interest only on the amount drawn down at each stage, not the full loan. That keeps your holding costs lower during the build period, which matters when you’re managing cash flow across a portfolio.
The realities worth knowing before you sign anything
Building and off the plan investing isn’t without risk. Delays happen. Variations add cost. Market conditions can shift between signing a contract and settlement.
The investors who navigate this well are the ones who get their finance strategy sorted before they fall in love with a floor plan.
That means understanding how much you can borrow, how the construction loan transitions to a standard investment loan at completion, and how the tax benefits play out in your specific situation alongside your accountant.
Thinking about your first or next investment property?
I work with investors at every stage from those buying their first investment to those building a portfolio across multiple properties. I can help you understand your borrowing capacity, structure the loan correctly, and make sure the finance side supports your long term strategy.