Budget shifts may prompt ill-advised yield chasing, PIPA warns

The Property Investment Professionals of Australia (PIPA) has warned investors that Federal Budget changes to negative gearing and Capital Gains Tax (CGT) are fuelling risky behaviour, with many chasing high-yield properties at the expense of long-term capital growth.

PIPA Chair Cate Bakos said the property taxation reforms were likely to trigger a surge of interest in regional locations, small units and apartments, challenging title types, commercial assets, and other cash flow–focused investments.

While positive cash flow can provide stability in the new taxation environment, Ms Bakos cautioned that it should never replace longstanding investment fundamentals.

“Positive cash flow may appear more valuable now that first-time investors no longer have access to negative gearing tax offsets unless they purchase brand-new property,” Ms Bakos said.

“It helps service debt, provides resilience against rising interest rates, and offers liquidity.

“But cash flow alone does not build wealth, because capital growth remains the cornerstone of successful property investment over the long-term.”

Complex landscape creates room for poor advice

Ms Bakos said the taxation changes had created a more complex landscape, where some inexperienced advisers may start recommending asset classes outside their expertise.

“Consumers must ask their advisers for their experience in recommending regional or commercial assets,” she said. “Do they understand the growth fundamentals of these markets, or are they simply chasing yield?

“Without proven expertise, investors could be steered into properties that look good on paper but fail to deliver capital appreciation.”

Ms Bakos said investors must balance cash flow considerations with growth fundamentals such as location, demand drivers, and supply constraints — the same factors that have historically underpinned strong long-term returns.

She also raised concerns that the policy environment was creating fertile ground for unscrupulous operators looking to capitalise on investor uncertainty.

“Spruikers often emerge in times of policy change, promoting properties that may not withstand professional scrutiny,” she said.

“Some of these higher risk properties may include internal floor areas that fall short of lending policy, or unusual title types that may require a significantly higher deposit than traditional residential options.”

Principles remain unchanged despite new rules

Despite the significant shift in the tax treatment of existing investment properties, PIPA’s position is that the underlying principles of sound property investment have not changed.

Ms Bakos was direct in her assessment of what the Budget does — and does not — alter for investors.

“Cash flow is important for sustainability, but capital growth is what compounds returns and builds wealth over time,” she said. “Investors must ensure their advisers are qualified, experienced, and aligned with their long-term goals.”

That message is particularly relevant for newer investors who may be entering the market for the first time under the revised negative gearing rules, which now restrict deductions on existing properties. For many first-time buyers, the temptation to focus solely on yield could prove costly if it leads them away from assets with strong capital growth potential.

Ms Bakos said the risks associated with poor advice in this environment are not merely short-term — they can damage an investor’s financial position for years.

“It’s vital that investors understand that poor advice can have long-lasting financial consequences with longstanding principles more important than reactionary pivots,” she said.

Consumer protection at the centre of PIPA’s agenda

PIPA said it would continue to advocate for stronger consumer protection and professional standards across the property investment advice industry, particularly as demand for advice intensifies in the wake of the Budget changes.

Ms Bakos urged investors to verify the qualifications and track record of any adviser they engage, and to be particularly cautious of anyone promoting high-yield opportunities in unfamiliar asset classes or regional markets without a demonstrable history in those areas.

“The Budget may have changed the rules, but it hasn’t changed the principles,” she said.