This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.
Key takeaways
- Australia's March 2026 Building Approvals release shows total dwelling approvals fell 10.5% to 17,300 (seasonally adjusted), with private apartments down 26.0% to 6,632 and private houses up 0.9% to 10,194.
- The value of total residential building fell 15.8% to $10.77 billion. Apartment approvals in original terms fell 30.2% to 3,768 dwellings.
- The release lands six weeks before the federal budget restricted negative gearing on residential property to new builds from 1 July 2027. Investors who bought before 12 May 2026 are grandfathered.
- NHSAC's March 2026 quarterly report forecasts roughly 938,000 dwellings against the 1.2 million National Housing Accord target, a shortfall of about 262,000 homes and a slip to September 2030 delivery.
- New build investor purchases keep the salary-offset version of negative gearing intact post-2027 and stack with $10,000 to $19,000 of year-one depreciation. Build-to-rent eligible projects get an accelerated 4% Division 43 rate over 25 years.
The ABS March 2026 Building Approvals release was always going to be the supply-side print that mattered most this autumn. The 2026-27 federal budget Treasurer Jim Chalmers handed down tonight needs new dwelling supply to step up sharply from 2027, because new builds are now the only way an Australian investor can negatively gear a freshly acquired residential property against wage income.
The supply data is not cooperating.
March 2026 dwelling approvals at a glance
The ABS recorded a 10.5% seasonally adjusted fall in total dwelling approvals to 17,300 for the month. The fall was driven almost entirely by apartments. Private sector dwellings excluding houses (mostly apartments, townhouses and units) fell 26.0% to 6,632, after a 101.1% February surge that produced the highest single month for that category since June 2018. Private sector houses ticked up 0.9% to 10,194.
In original terms, apartment approvals fell 30.2% to 3,768 dwellings, the softest calendar-2026 result for that segment so far.
The value of total residential building fell 15.8% to $10.77 billion for the month. Non-residential building also fell, down 25.3% to $5.97 billion. State by state, only New South Wales (+3.2%) and Tasmania (+2.6%) recorded month-on-month gains. Victoria (-16.9%), Western Australia (-15.5%), Queensland (-6.4%) and South Australia (-2.1%) all went backwards.
| State | March 2026 change | Read |
|---|---|---|
| New South Wales | +3.2% | Strongest result, off a low base |
| Victoria | -16.9% | Largest fall of the major states |
| Queensland | -6.4% | Apartment pipeline weakening |
| Western Australia | -15.5% | Sharp single-month reversal |
| South Australia | -2.1% | Held up better than VIC and WA |
| Tasmania | +2.6% | Small-volume positive |
The release also reflects a broader pattern. Construction cost growth has held the segment back even as established market prices climb. The ABS's Building a New Home commentary puts new build cost inflation at 3.7% over the year to February 2026. Material cost shocks from the Iran-driven fuel disruption that opened in late February have layered on top.
The federal budget just put new builds in the spotlight
The 2026-27 federal budget tonight confirmed that from 1 July 2027, negative gearing on residential property will be limited to new builds. Established property bought after budget night (12 May 2026) will have its rental losses quarantined against rental income only, not deductible against salary.
Properties owned on 12 May 2026 are grandfathered under the old rules. Investors with existing portfolios are not directly affected unless they add another established property after budget night. The 50% CGT discount is replaced by cost base indexation plus a 30% minimum tax rate on capital gains, also from 1 July 2027.
The policy intent is reasonably clear: push investor capital into new construction, supply new dwellings, and reduce the bidding pressure on the established stock that first home buyers compete for. For that to work, the construction pipeline has to be there.
The supply problem just got worse
The National Housing Supply and Affordability Council (NHSAC) is the statutory body that monitors progress against the National Housing Accord target of 1.2 million new homes over the five years to 30 June 2029. Its March 2026 quarterly report forecasts roughly 938,000 dwellings will actually be delivered in the Accord period, a shortfall of about 262,000 homes.
The 1.2 million target itself is not abandoned. NHSAC now expects the figure to be reached around September 2030, more than a year past the original deadline. The Council flagged that the Iran conflict has added fresh uncertainty to the supply outlook, with material cost effects expected to compound through the next several quarters.
The HIA's January 2026 forecast saw multi-unit starts lifting 6.5% in 2026 to about 76,570 dwellings, then accelerating to 96,910 in 2028 and 99,960 in 2029 as the apartment construction cycle recovers. The March approvals print is consistent with the lower end of that path, not the upper.
What the supply trap costs investors
Take a $750,000 budget for an investment purchase. Two paths under the new rules:
-
Established three-bedder bought in November 2026. Negative gearing against salary is permitted until 30 June 2027. From 1 July 2027 the salary offset is gone; losses can only offset other rental income or future capital gains. Roughly $4,000 a year of salary tax shielding disappears for a typical leveraged $750k buy on a modestly negatively geared deal. CGT on sale also moves to indexation plus the 30% minimum tax rate instead of the 50% discount.
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Off-the-plan two-bedder bought from a project completing in late 2027. Negative gearing stays intact (new build). Year one depreciation in the $10,000 to $19,000 range stacks on top. Settlement risk is real and pre-sale prices today already price in some of the construction cost inflation mentioned above.
The new build path keeps the tax architecture intact, but it carries pre-settlement valuation risk that established stock does not. The other complication is supply. If retail investor demand for new builds picks up sharply between mid-2026 and mid-2027, off-the-plan pricing has historically responded fast. The lever the budget wants to pull (private investor capital into new construction) only works if pricing for those new builds remains stackable on cash flow.
Depreciation maths on a new build
Division 43 lets an investor claim 2.5% of original construction cost per year for 40 years on residential buildings built after 15 September 1987. Division 40 covers plant and equipment (air conditioning, hot water systems, ovens, carpets, blinds, fans), with a faster schedule and a higher initial deduction in the first few years.
For a brand-new apartment with a construction cost share of $400,000 and $30,000 of fit-out, year one looks roughly like this:
- Division 43: $400,000 x 2.5% = $10,000
- Division 40: variable, but in year one typically $4,000 to $9,000 depending on the item mix
A combined year-one deduction of $14,000 to $19,000 is realistic on a new build. None of that is available on an established purchase made after 9 May 2017 for Division 40, which is a hard ceiling the budget did not change. The new build deduction stays on top of mortgage interest, council rates, water, body corporate, insurance, repairs and management fees.
For an investor in the 37% marginal bracket, $15,000 of deductions saves about $5,550 of tax in year one. On a $750,000 borrow at 6.90% (the post-May 15 Big 4 average variable rate), that recovers close to two months of after-tax interest.
Build-to-rent and other new-build options
The 2026 incentive set extended an accelerated 4% Division 43 rate over 25 years for eligible build-to-rent developments, instead of the standard 2.5% over 40 years. BTR remains largely an institutional segment in Australia today and retail investors usually access it through listed REITs or unlisted property funds.
For direct ownership in a new build, the cleanest pre-2027 plays are:
- Off-the-plan apartments completing 2027 to 2028. Lock in the new-build status now, settle once the negative gearing rules have already changed.
- House and land packages with completion before 30 June 2027. Faster route to a new-build classification, but more capital is tied up in land that does not generate Division 43 deductions.
- Knock-down rebuilds on a held block. The build is new, but the land continues under your original ownership.
The risk on all three is the supply pipeline itself. March's apartment approvals print, combined with NHSAC's downward revision to 938,000 dwellings, means the new-build supply the budget assumes will scale up is not yet doing so.
What landlords should do this week
- Check your current portfolio dates. If every property in your portfolio is held in your name as at 12 May 2026, your existing positions are grandfathered. Confirm titles and dates with your conveyancer or solicitor, especially for any property settled in the past 60 days.
- Map your IO and fixed rate rollovers. With Big 4 variable rates lifting from May 15, every rollover this calendar year materially changes net cash flow. The interest-only rollover wave is now landing into a fully post-pass-through rate environment.
- If you are buying, pick a side before signing. The deals that stack today on established stock get worse if you also lose the salary offset from 1 July 2027. New build deals improve relatively under the budget but carry settlement risk.
- Order your depreciation schedule early. A quantity surveyor schedule pays for itself in year one on most new builds; you only need it once to claim for the next 40 years.
The budget changes the rules. The supply data shows the new rules are landing on a market not yet building enough new homes to absorb the redirection of investor capital. Watch the April building approvals release (due late May) for whether the apartment segment recovers, and watch developer pricing on off-the-plan stock for the demand-side reaction.
Run the numbers properly
Working out which side of the budget line a deal stacks on is exactly the kind of calculation a landlord should not eyeball. The Propkt mortgage calculator lets you model a new-build purchase against an established one at today's rates, factor in depreciation, and check whether the post-2027 cash flow still works without the salary offset. The Propkt expense tracker and rent management tools keep the receipts your accountant will need in 14 months, when the rules change.
The supply trap is real. The March print is the early signal. Plan for the market the budget is trying to build, not the one we are in this week.