Investors urged to rethink new-build property strategies amid financial risks
By
Access Wealth Managing Director & Founder Dory Senior
In the wake of recent Australian property tax reforms, investors are increasingly gravitating towards new-build and off-the-plan properties, driven by the allure of preserving negative gearing and capital gains tax benefits. However, experts are cautioning against the notion that these properties are a “magic bullet” for financial success. Dory Senior, Managing Director and Founder of Access Wealth, is sounding the alarm on the potential pitfalls of this strategy.
“The risk isn’t in buying new — it’s in buying new without doing the groundwork,” said Mr Senior. He emphasised that the recent surge in interest for new builds, spurred by the Federal Budget changes, has fostered a dangerous belief that these properties are a guaranteed solution for the future. “When people chase negative gearing without understanding the fundamentals, that’s when they get caught out.”
This warning comes on the heels of several high-profile collapses in the buyer’s agency sector, where operators have been found holding millions in prepaid fees. Mr Senior pointed out that these incidents should serve as a stark reminder that not all advice is created equal. “When businesses prioritise sales over delivery, consumers get hurt,” he said. The same conditions that led to these collapses are now re-emerging in the new-build sector, given the recent property tax reforms.
One of the primary concerns is that investors are being lured into new-build contracts without a full understanding of critical factors such as builder insurance limits, construction delays, inflated pricing, and the distinction between full-turnkey and partial-turnkey contracts. “We’ve seen people handed a property with no driveway, no landscaping, or no blinds because they didn’t know what to look for,” Mr Senior noted.
Mr Senior outlined a structured approach that investors should follow to mitigate these risks. He stressed the importance of starting with clear investment goals, which many investors overlook in their rush to secure tax-advantaged properties. “If you don’t know whether you’re investing for retirement, income, or to pay off your home faster, you can’t judge whether a property is fit for purpose and that’s where poor decisions start,” he said.
The second step, according to Mr Senior, involves assessing one’s financial resources, which has become a significant pressure point since the Federal Budget. “Your borrowing capacity, equity position, and weekly affordability matter far more than any retained tax benefit,” he explained. He highlighted that banks removing negative-gearing add-backs for established properties is already reducing borrowing capacity by $150,000 to $200,000 for some investors.
Understanding the true cost of holding a property is a crucial part of this assessment. “We don’t model properties on best-case scenarios,” Mr Senior said. “We deliberately stress-test the numbers, which means we overestimate costs, build in vacancy buffers, assume higher interest rates, and allow for council rates, water rates, insurance, property management fees and maintenance – even where the property is brand new.” By allowing around $1,000 a year for maintenance and underestimating rental income, Access Wealth aims to create a conservative picture of affordability.
The third step involves evaluating the opportunity itself, an area where Mr Senior believes investors are most easily misled. “People jump straight to the suburb or the glossy brochure, but if the fundamentals aren’t there such as population growth, infrastructure and rental demand the property simply won’t perform,” he said. He cited high-growth local government areas like Ipswich, Logan, and Moreton Bay in Southeast Queensland, as well as Melton and Greater Geelong in Victoria, as examples of markets supported by strong population growth and infrastructure investment. “These locations still need to be assessed property by property,” he added.
The final step is scrutinising the builder, the contract, and the inclusions. “This is where the biggest risks sit in the new-build sector,” Mr Senior warned. “You need to know the builder’s track record, their insurance limits, their pipeline of existing work and whether the contract is genuinely fixed-price and full-turnkey. If you don’t, you can end up with delays, cost blowouts, or a property missing basic essentials.”
Despite the potential advantages of new builds, Mr Senior cautioned that affordability does not equal suitability. “New builds can be incredibly powerful, but only when they’re chosen through a structured process,” he concluded. “There is no magic bullet. There is only due diligence.”