Apartments are now back on Investors Radar for many reasons …
An older boutique apartment, bought below what it would cost to build today, with a 5% to 6% gross yield. It is one of the most common pitches investors are hearing after the 2026 Budget. Here is what the brochure usually leaves out: depreciation, holding costs, maintenance and how long it really takes to break even.
Buyers agents play a valuable role. They give you access, negotiate on your behalf and take emotion out of the purchase. We offer a buyers advocacy service ourselves, for clients who are set on an established property, yet our focus is on matching the ‘investment vehicle’ to your purpose for the investment and your budget – explaining how the numbers that drive your investment work – does your buyers agent do this for you for the fee you are paying them?
But the typical buyers agency model, in general, has a particular shape: buy established stock at a lower entry price, rely on rental yield to carry it, and let capital growth do the heavy lifting. Since 12 May 2026, the maths behind that model has changed. This article compares it, line by line, with the new build approach properT network specialises in.
1. What Changed in the 2026 Budget
If you buy an established residential property after 7:30pm AEST on 12 May 2026, then from 1 July 2027 its rental losses can no longer reduce the tax you pay on your wages or other income. The loss is quarantined: it can only be used against income from residential property, such as net rent from other residential properties, or against the capital gain when you sell. Anything left over is carried forward.
Eligible new builds keep full negative gearing, and the first owner can still choose the 50% capital gains discount. Properties held before Budget night are grandfathered, and commercial property is not affected at all. We cover the detail in Existing Homes vs New Builds and Negative Gearing Changes 2027: The Cash Flow Problem.
The tax loss on an established purchase is not gone. It is delayed. Meanwhile, the shortfall comes out of your pocket every week, and that affects what the bank will lend you next especially if you want to invest again.
2. Side by Side: Buyers Agency vs properT network
The table below compares a typical buyers agency recommended purchase (an established apartment in an older boutique block) with a typical properT network purchase (an eligible new build).
| Typical buyers agency purchase | properT network new build | |
|---|---|---|
| Typical purchase | Established apartment in an older boutique block, often 20 to 50 years old | New and to-be-built: house and land, off the plan, townhouses and apartments |
| Client cost | Buyers agent fee, paid by the client | No buyers agent fee on new and to-be-built property; our research report fee is included |
| Return driver | Capital growth from a lower entry price, plus rental yield | Capital growth plus cash flow, depreciation and tax benefits, so you can hold more than one property |
| Age in 10 years | A 30-year-old apartment is 40 years old when you come to sell | A new build is only 10 years old, ten years younger than the property next door |
| Growth in dollars (7% a year, 10 years) | $400,000 grows to about $787,000 :- a gain of around $387,000. 10% deposit – $40k = lower ROI. | $600,000 grows to about $1,180,000: a gain of around $580,000, roughly $193,000 more. 10% deposit $60k = increased ROI. |
| Tax position | Purchases after 12 May 2026: losses quarantined from 1 July 2027 | Eligible new builds keep negative gearing against wages |
| Depreciation | Little or none on older stock: no deduction on second-hand fittings, limited or no building write-off left. Whatever is available still counts, purchases after 12 May 2026 it only adds to a quarantined loss that is carried forward, does not reduce tax on wages & negatively impacts weekly cash flow | Full building write-off on today’s construction cost, plus fittings for the first owner, claimed against wages each year, so it positively lifts cash flow now |
| Holding costs | Shortfall funded from after-tax income; break-even can take many years | Shortfall reduced by depreciation and a tax refund |
| Maintenance | Older buildings need more repairs and replacements; strata special levies are common – eat into your ROI | Builder’s and statutory warranties; low maintenance in the early years |
| Lending and borrowing capacity | Major lenders no longer count negative gearing in serviceability for established purchases contracted after 12 May 2026, which can cut borrowing capacity | Lenders still count negative gearing for eligible new builds, so the same income can support a larger loan, and the next one sooner |
3. Depreciation: Why Older Apartments Have So Little Left
Depreciation is a non-cash deduction. You do not spend the money, but you claim it against your rental income, which lifts your after-tax cash flow. It comes in two parts, and older apartments miss out on most of both.
- Fittings (plant and equipment). Since 1 July 2017, individual investors cannot claim depreciation on fittings already in a second-hand residential property: the oven, hot water system, carpets, blinds and air conditioning. Only items you install yourself can be claimed.
- Building (capital works). Residential buildings started after 15 September 1987 can be written off at 2.5% a year of the original construction cost, over 40 years. A building started before then has nothing left to claim. A building from the early to mid-1990s has only a few years left, calculated on a 1990s construction cost.
- A new build gets the full building write-off on today’s construction cost for 40 years, plus fittings for the first owner. The largest deductions come in the early years, when your cash flow is tightest.
So when you hear a depreciation figure quoted for an older block, ask one question: which year was this building started, and how many years of write-off are left?
There is a second catch. Depreciation is still claimable on an established property bought after 12 May 2026, but from 1 July 2027 it simply becomes part of the rental loss, and that loss is quarantined and carried forward. It no longer reduces the tax on your wages each year, so it does nothing for your weekly cash flow until you have other residential income or a capital gain to use it against. On an eligible new build, the same deduction reduces your tax every year.
4. Holding Costs: How Long Until It Breaks Even?
A common claim is that an older apartment at a 5% to 6% yield will be slightly negative at first, then break even within two or three years as rents rise. We ran the numbers on two typical examples.
- One-bedroom at $350,000, renting at $370 a week.
- Two-bedroom at $500,000, renting at $580 a week.
With interest-only loans at a fixed 6.5% and typical running costs (strata, council and water rates, management, insurance, repairs and land tax), both start roughly $195 a week short, before tax. With rents rising 5% a year and costs rising 3%, they take 9 to 12 years to break even. Even at 7% rent growth, it takes 6 to 9 years.
Under the new rules, none of that weekly shortfall reduces the tax on your wages. You fund it from after-tax income, and the bank sees it when you apply for your next loan.
5. Maintenance: The Cost Nobody Puts in the Yield
Gross yield is calculated before costs. Older buildings are known to need more ongoing work: roofs, elevators, painting, carpets, lighting, hot water systems, plumbing, wiring, kitchens and bathrooms all reach the end of their life. In strata blocks, those costs are shared through the owners corporation, and a large repair can mean a special levy on every owner. Maintenance eats into your cash flow and Return on Investment (ROI)
A new build comes with builder’s and statutory warranties, modern materials and current energy standards, so maintenance is typically low for years. That is part of our ten-year rule: a new build stays ten years younger than the property next door, including when you sell.
6. Growth in Dollars, Not Just Percentages
A lower entry price can sound safer. Safety is an Emotion. Whenever you include Emotion in your Investment Decision making, you are guaranteeing yourself a lower return on your investment.
Give thought to the same growth rate. On a lower base it produces fewer dollars. And age compounds too: a 30-year-old apartment bought today is 40 years old when you sell in ten years, while a new build is only 10. As you bought low, the market in 10 years on lower entry will still be proportionately low.
- At 7% a year growth, a $400,000 property is worth about $787,000 after 10 years: a gain of around $387,000.
- At the same 7% growth rate, a $600,000 property is worth about $1,180,000: a gain of around $580,000, roughly $193,000 more equity.
Here’s the question worth asking: would you put in an extra $20,000 into your investment to end up with around $193,000 more growth? With a 10% deposit, that’s the difference between the $400,000 apartment ($40,000 down) and the $600,000 new build ($60,000 down) over 10 years.
A higher-priced property needs a bigger loan, so this only works if you can hold it comfortably. That is why the cash flow, depreciation and tax benefits of a new build matter: investors can often borrow more on a new build, and hold it with a smaller weekly shortfall.
7. Lending: Banks Now Treat Them Differently
When a bank assesses how much you can borrow, it has traditionally added back the tax benefit of negative gearing. Since the Budget, the major lenders have changed that. Macquarie, CBA, ANZ, NAB, Westpac and ING have all updated their serviceability calculators so that, for established investment properties contracted after 12 May 2026, negative gearing is no longer counted. For eligible new builds, it still is.
The effect can be significant. Early broker estimates put the reduction in investor borrowing capacity at around 8% to 12% on established purchases. In practice, the same household income can support a larger loan on a new build than on an established property, which matters most when you plan to buy a second or third property. Your finance broker can run the numbers for your situation, or we can refer you to one.
8. A Like-for-Like Comparison
You will often hear a cautionary tale about an off-the-plan apartment in a CBD tower that lost value. We agree: investor-heavy towers in oversupplied markets are exactly what our Empirical Formula screens out, alongside one-industry towns and boom-and-bust markets.
The fair comparison is like-for-like: the established stock a buyers agent recommends against the new stock we would recommend, in a market chosen on its fundamentals. That is where depreciation, holding costs and maintenance make the difference. Our Investment Property Market Intelligence reports show you where a market sits before you choose the property.
9. When an Established Property Is the Right Choice
None of this makes new property automatically better. If you already earn net rental income from other residential property, a quarantined loss can be used against it. Some investors want a particular location where new stock is not available. And some established properties can be a good buy.
Where an established property suits your strategy, our buyers advocacy service works with local buyers agents in the locations our research identifies. What matters is that you choose with the full numbers in front of you, not just the entry price and the yield.
Watch: New Build vs Established, the 10-Year Numbers
Prefer the short versions? Depreciation Explained: New vs Established · The Hidden Cost of Holding an Investment Property · Same Growth, $47,000 More Equity · Cheaper Isn’t Always Better
Want to see how an established apartment and a new build compare for your own income, budget and goals? Book a complimentary strategy session with properT network.
General information only. Figures are illustrative and based on stated assumptions: interest-only loans of $322,000 and $460,000 (including capitalised LMI) at a fixed 6.5%; annual running costs of $8,500 and $10,500 rising 3% a year; growth figures assume 7% a year compounding for 10 years. Lender policies change and vary between lenders. Tax, depreciation and lending outcomes vary with your circumstances, state and lender. Seek tax, legal and finance advice before making an investment decision.
Related reading
New Build vs Established: What the 10-Year Numbers Show
Borrow More, Buy Better: The New Build Advantages Most Investors Miss
