New homes are about to become the only kind of residential property that new investors can negatively gear. Yet the latest official figures show approvals for new houses slipping, just as the Reserve Bank lifted the cash rate to 4.85 per cent. For investors deciding between established stock and a new build before the 2027 changes start, the Supply pipeline is now a tax question as much as a housing one.

What the September figures show

The Australian Bureau of Statistics released its September building approvals on 2 November. In seasonally adjusted terms, total dwelling approvals rose 5.1 per cent to 17,948.

That headline rise hides a split. Private sector house approvals fell 5.3 per cent to 10,432.

Private dwellings excluding houses, which include apartments and townhouses, jumped 16.6 per cent to 6,579. However, that category is still down 20.5 per cent on a year earlier.

The ABS's Daniel Rossi said the fall in house approvals was "the largest since August 2025".

He also noted it was "the ninth consecutive month where more than 10,000 private sector houses" were approved.

In original terms, apartment approvals rose 25.6 per cent to 4,129, while townhouse approvals rose 8.3 per cent to 2,792.

The total value of new residential building approved fell 3.3 per cent to $9.74 billion, according to the ABS.

By state, private house approvals in September were 2,895 in Victoria, 2,407 in Queensland, 2,035 in New South Wales, 1,832 in Western Australia and 955 in South Australia.

Monthly approvals data can be volatile, so one month's movement is not a trend on its own. Apartment approvals in particular tend to swing with the timing of large projects.

Reading between the lines

A 5.3 per cent fall to 10,432 implies private house approvals were running at roughly 11,000 in August. That is a calculation from the ABS percentages, not a separately published figure.

The ninth straight month above 10,000 suggests the house pipeline has softened rather than collapsed. But the Margin above that level is now thinner than it was a month ago.

For apartments, the 16.6 per cent monthly jump looks strong, but the 20.5 per cent fall over the year is the more telling number. Medium- and high-density projects are typically where investors buy off the plan, and those are the dwellings most likely to count as new builds under the 2027 rules.

The mismatch matters for policy. The tax changes are designed to push investor Demand towards new stock, but that only adds homes if developers have the finance and confidence to start projects.

Why investors are being steered to new builds

Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, negative gearing is limited to new builds for properties bought after 7:30pm AEST on 12 May 2026. The limit applies from 1 July 2027. Existing holdings are grandfathered.

For established homes bought after that budget-night cut-off, rental losses will no longer be able to be offset against wage income from 1 July 2027.

What counts as a new build is still being settled in Parliament. Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 defines a "new residential dwelling" and sets out exemptions for affordable housing, public housing and other purposes. The bill passed the House on 29 October and is before a Senate committee.

The policy intent is to direct investor money into additional supply. The September figures show that this has not yet translated into more house approvals.

Hypothetical example: what the new-build preference is worth

Hypothetical example: an investor earning a salary taxed at the 30 per cent marginal rate, plus the 2 per cent Medicare levy, buys a rental property after 12 May 2026. In 2027–28, the property makes a net rental loss of $15,000 after interest and other costs.

If the property qualifies as a new build, the investor can generally deduct that loss against their salary. At a combined rate of 32 per cent, that reduces their tax by $15,000 multiplied by 0.32, or $4,800 for the year.

If it is an established home bought after the cut-off, that $15,000 loss cannot be used against their salary from 1 July 2027. The $4,800 annual tax reduction is not available against wage income.

Over five years of similar losses, the difference adds up to $24,000 in tax reduced against wages. That gap is what the policy relies on to make new builds more attractive.

This is a simplified illustration. Actual outcomes depend on income, Loan size, rent and how the final definitions apply.

Higher rates and the 'perfect storm'

The RBA's 3 November statement said higher interest rates and falling housing prices and turnover are expected to weigh on dwelling Investment and household consumption.

The Real Estate Institute of Queensland is worried. The REIQ's Antonia Mercorella said that higher rates, lower borrowing capacity and policy uncertainty were a "perfect storm" for new housing, and that new-supply momentum was losing steam.

The rate rise was the fifth this year. Finder's Richard Whitten said that repayments on the average $730,719 loan are up $538 a month since January. Herron Todd White's Gavin Hulcombe said this year's rate rises had lifted investor borrowing costs by about 20 per cent.

For investors, that means the tax advantage of a new build has to be weighed against higher borrowing costs, construction risk and a falling market. A Tax deduction only offsets part of a real cash loss.

Key dates to watch

  • 4 November: The RBA Chart Pack is released.
  • 5–6 November: Senate Economics Legislation Committee hearings on the Tax Reform No. 3 Bill, which includes the new-dwelling definition. The committee's report is due on 13 November.
  • 25 November: The next monthly CPI figures, which will shape the rate outlook.
  • 1 July 2027: Negative gearing limits for post-budget established purchases take effect.

The next few months of approvals data will show whether investors are actually moving into new builds, or simply stepping back from the market altogether.