Property Investing Isn't Dead in Victoria – It's Evolving

Shannon Koetsveld
Jun 3
8 min read

Updated: Jul 3

The smartest investors don't follow the crowd. They follow the fundamentals.

Since the Federal Budget announcement proposing changes to negative gearing and capital gains tax, there has been no shortage of headlines predicting the end of property investing as we know it.

At The Property Effect, we see it differently.

Property investing isn't dead in Victoria. In fact, for strategic investors, this may be one of the most significant opportunities we've seen in years.

The key is understanding that the market has changed, investor behaviour is changing, and therefore investment strategy must change too.

This is what we call the Hybrid Culture.

What is the Hybrid Culture?

The Hybrid Culture recognises that people no longer live, work and invest the way they did five years ago.

Flexible working arrangements, lifestyle-driven decisions, infrastructure improvements and affordability pressures have reshaped buyer and tenant demand across Victoria.

Many people are no longer tied to a CBD office five days a week. Instead, they are seeking locations that offer lifestyle, connectivity, affordability and convenience.

As investors, it is important to understand where people are choosing to live rather than where they used to live. Demand ultimately follows people, and property performance often follows demand.

The Budget May Change the Rules, But It Doesn't Change the Fundamentals

Importantly, the proposed changes remain subject to legislation.

Under the current proposal, negative gearing would remain available for new residential housing, while established properties purchased after Budget Night may lose access to the ability to offset rental losses against salary and wages from 1 July 2027. The Government's stated objective is to direct more investment into increasing housing supply.

If these reforms proceed, investors may need to become more selective. That isn't necessarily a bad thing.

For many years, tax benefits have formed part of the investment decision making process for property investors. However, tax outcomes alone have never determined whether an investment ultimately succeeds or fails.

In our view, successful investing has always involved balancing multiple factors, including location, tenant demand, cash flow, housing supply, demographic trends and long-term market fundamentals. While tax incentives can influence investment decisions, they should generally be considered as one part of a broader strategy rather than the primary reason for purchasing an asset.

Of course, it's important to acknowledge that nobody has a crystal ball.

Property markets do not operate in a static environment. Over the life of an investment, there will inevitably be periods of growth, periods of stagnation and sometimes periods of decline. Interest rates change, governments change policy, economic conditions evolve and buyer behavior shifts.

Every property purchased today is based on the information available at that point in time and an assessment of the risks and opportunities that exist in the current market. While investors can improve their chances of success by focusing on quality assets, strong locations and sound fundamentals, no individual property, adviser or investment strategy can guarantee future performance.

The goal is not to predict the future perfectly. The goal is to make informed decisions based on the best available information and position yourself to benefit from long-term market cycles.

Why New Stock Is Receiving Increased Attention

The proposed reforms are already shifting investor focus toward quality new housing because these assets may continue to retain negative gearing benefits while also offering significant depreciation advantages.

New and near-new properties may offer:

Higher depreciation benefits
Improved cash flow outcomes
Lower maintenance costs in the early years
Strong rental appeal
Potentially higher rental yields
Greater alignment with future housing policy

However, there is a critical warning investors need to understand.

Not all new stock is good stock.

In particular, investors should exercise caution when considering off-the-plan purchases.

One of the most common challenges associated with off-the-plan purchases is valuation risk at settlement. Market conditions can change during the construction period, leaving buyers in a position where the completed property is valued below the contract price, potentially creating funding challenges.

Many investors may benefit from considering properties that are nearing completion or already completed, as this allows greater visibility around construction quality, valuation outcomes and the ability to undertake independent due diligence before committing to a purchase.

Regardless of whether a property is brand new, recently completed or several years old, investors should consider obtaining an independent building and pest inspection before proceeding. New homes and apartments are not immune from defects, poor workmanship or construction issues, and an independent assessment may help identify concerns that are not immediately visible.

Investors may also wish to research the builder, developer and key project participants before committing to a purchase. This could include reviewing the builder's track record, previous projects, industry reputation and any publicly available information relating to regulatory action, disciplinary findings, significant defects, building disputes or Victorian Building Authority records where applicable.

A new property should never be assumed to be a quality property simply because it is new. In our experience, thorough due diligence remains one of the most important steps in any property acquisition process.

Established Property Still Has a Place

It is also important to recognise that quality established property may continue to play a significant role in many long-term investment strategies.

Under the proposed Budget measures, investors purchasing established residential property after Budget Night may no longer be able to offset rental losses against salary and wages. However, subject to the final legislation, those losses may be carried forward and used against future residential rental income and future residential property capital gains.

As a result, some investors may continue to favour established property, particularly where the asset offers strong long-term growth prospects, scarcity value, land content, desirable owner-occupier appeal or exposure to tightly held locations.

In these circumstances, the investment thesis may be driven less by immediate tax benefits and more by long-term wealth creation, capital growth and the underlying quality of the asset itself.

Whether an investor favours new housing, established property or a combination of both will ultimately depend on their individual objectives, financial circumstances, risk profile and overall investment strategy.

Location Still Matters More Than Tax

One of the biggest mistakes investors make is assuming that because a property is brand new, it must automatically be a good investment.

Nothing could be further from the truth.

A poorly located townhouse in an oversupplied area remains a poor investment regardless of the tax benefits attached to it.

Historically, some of the strongest performing assets have been those that align with the demographic profile of the area.

For example:

Young professionals may seek low-maintenance apartments close to transport, lifestyle precincts and employment hubs.
Families often prioritise schools, parks, larger accommodation and community infrastructure.
Downsizers frequently value accessibility, convenience and established amenities.
Essential workers may require affordability and proximity to employment centres.

The question is not simply, "Is this a new property?"

The question is:

"Does this property solve a housing need for the people who want to live there?"

Victoria's Supply Challenge Remains

Despite planning reforms and government housing targets, Victoria continues to face a significant housing supply challenge.

Population growth continues to outpace housing delivery, creating ongoing pressure on both rental markets and housing affordability.

Multiple forecasts suggest Melbourne's population growth will continue strongly over the coming decades while housing supply struggles to keep pace.

Even the Federal Government has acknowledged that the proposed tax reforms are designed to encourage investment into new housing supply.

For investors, this creates an important consideration.

Quality housing located in areas experiencing population growth, infrastructure investment and strong tenant demand may continue to benefit from favourable long-term fundamentals.

The Future Investor Will Be More Strategic

The investors who thrive over the next decade may not necessarily be those chasing the largest tax refund.

Rather, they are likely to be those who understand:

Population growth
Infrastructure spending
Employment hubs
Demographic shifts
Housing scarcity
Tenant demand

These fundamentals have historically played a significant role in driving property performance regardless of which political party occupies Treasury benches in Canberra.

Strategy First, Property Second

One of the biggest mistakes we see investors make is rushing into the market because they are worried about missing out, chasing a tax benefit or reacting to media headlines.

Property should not be viewed in isolation. For many people, it forms just one component of a broader financial strategy designed to support long-term objectives.

Before entering the market, many investors find value in discussing their goals with appropriately qualified advisers such as accountants, financial planners to better understand how a property purchase may fit within their overall financial position and future plans.

Some of the questions worth considering include:

What am I trying to achieve over the next 10, 20 or 30 years?
How does property fit within my broader wealth creation strategy?
What level of cash flow can I comfortably sustain?
What is my exit plan or fall back position?
How may future borrowing capacity be impacted?
What ownership structure is appropriate for my circumstances?
How does this investment complement my existing assets and long-term retirement planning?

The reality is that there is no single property investment strategy that suits everyone.

A property that may be suitable for a high-income professional seeking tax efficiency could be entirely unsuitable for someone focused on cash flow, business growth or retirement planning.

In our experience, investors who establish a clear strategy before purchasing often place themselves in a stronger position to make informed long-term decisions.

Too often, people fall in love with a property first and attempt to justify the purchase afterwards.

At The Property Effect, we believe property should be the vehicle that helps deliver your goals, not the goal itself.

Final Thoughts

The proposed Budget changes have created uncertainty, but uncertainty often creates opportunity.

Victoria remains Australia's second-largest economy, continues to attract strong population growth and still faces a significant shortage of quality housing.

At The Property Effect, we believe the conversation should never start with tax, interest rates or even the property itself. It should start with strategy.

Once you understand where you are trying to go financially, selecting the right property often becomes significantly easier.

Tax outcomes can certainly influence investment decisions, but in our view the strongest investment strategies are built on fundamentals that extend well beyond the tax treatment of an asset.

The future belongs to investors who embrace the Hybrid Culture, understand changing buyer and tenant behaviour, align their investments with their broader financial objectives and position themselves in locations where people genuinely want to live, work and build their lives.

Property investing isn't dead.

It's simply evolving.

And for those willing to adapt, the opportunities ahead may be greater than ever.