New builds face the full-cycle test as investor enquiries surge 46 per cent

A post-Budget shift toward new residential investment is exposing a more sophisticated market test: whether a property can retain its appeal after depreciation benefits diminish and the cycle turns.

Focus Property Group has recorded a 46 per cent increase in investor enquiries since the federal Budget, with experienced investors requesting deeper comparisons between new builds and established homes. Director André Knott said the decision was becoming less ideological and more analytical.

“New versus established is the wrong binary unless you also compare land, supply, build quality and exit liquidity,” Knott said.

The surge in enquiries reflects a broader recalibration among investors navigating a changed policy environment. Rather than pursuing new builds purely for tax outcomes, investors are increasingly asking whether a property can sustain its performance across a full market cycle — not just during the depreciation-heavy early years.

Knott’s recent appearances in The Australian, on 2CC Breakfast and on ausbiz TV highlighted how the investor community is adapting after policy change. He said the next phase required a full-cycle framework rather than a short-term comparison of tax outcomes.

“Depreciation is an early-cycle advantage; tenant demand is the whole-cycle test,” he said.

The analytical shift Knott describes centres on five key variables: land value, replacement cost, rental competition, maintenance exposure and exit liquidity. New builds offer depreciation benefits, contemporary floor plans, energy efficiency and lower initial maintenance costs, while also directly contributing to dwelling supply. Established properties, by contrast, may offer scarce land in mature locations, established rental evidence and greater renovation potential.

Neither category is inherently superior. According to Knott, outcomes depend on entry price, local supply conditions, demographic demand and the investor’s holding capacity — factors that vary significantly across markets and price points.

The framework Knott advocates asks investors to interrogate several critical questions before committing. Will a new property face concentrated competing supply from similar builds in the same precinct? Does an established dwelling carry unbudgeted capital works risk? And critically, will either asset remain affordable to its target tenant as the cycle progresses?

“A suburb can grow while an individual property underperforms because too much similar stock arrives at once,” Knott said.

That warning is particularly relevant in greenfield and high-density apartment markets, where new supply pipelines can erode rental yields and capital growth prospects even as broader city-wide conditions improve. Investors who focus solely on depreciation schedules without accounting for localised supply dynamics risk buying into oversupplied precincts where tenant demand is diluted.

On the established side, renovation optionality represents a genuine advantage — but one that comes with its own risks.

“Established housing carries renovation optionality, but it also carries capital-expenditure uncertainty,” Knott said.

Older dwellings may require significant unplanned spending on roofing, plumbing, electrical systems or compliance upgrades that can erode the apparent value advantage over a new build, particularly for investors with limited cash buffers.

Knott said the strongest investments — across both categories — tend to share a common set of reinforcing characteristics: construction quality appropriate to the local market, a meaningful land component, proximity to local employment centres and access to infrastructure that supports long-term population demand.

“The best new build is one that behaves like a scarce home, not a replaceable product,” he said.

That distinction matters because replaceability is ultimately what separates a transactional asset from one that compounds over time. New builds in precincts where similar stock can be delivered indefinitely offer limited scarcity premium, while those in constrained locations with genuine infrastructure and employment anchors are better positioned to hold value once depreciation benefits are fully exhausted.

For investors assessing the current opportunity set, Focus Property Group’s data suggests the market is moving past the initial post-Budget enthusiasm and into a more rigorous due diligence phase — one where the full-cycle performance of a property, rather than its first-year tax profile, is becoming the dominant selection criterion.