Property investors may be more likely to put their money in commercial real estate rather than housing following tax changes announced in the federal budget this week, industry figures say.
Labor abolished negative gearing for established residential properties purchased after the budget announcement on Tuesday and announced the 50 per cent capital gains tax discount would be replaced with an inflation-indexation model and 30 per cent minimum tax rate on gains from July 1, 2027.
However, commercial property assets – such as self-storage facilities, warehouses and retail buildings – remain exempt from the negative gearing changes, but not those made to capital gains tax.
That could be enough of an incentive for some investors to park their money in commercial property to take advantage of any rental losses, which can be written off against any other income to reduce their income tax bill, according to industry figures.
Tas Costi, co-founder of commercial property buyers agency Costi Cohen, agreed that commercial property would be more attractive after the tax changes, particularly for investors focused on stronger cash flow, income security and long-term asset quality.
“We expect demand to continue concentrating toward commercial properties with long leases, fixed rental increases and strong underlying land value,” he said. “Particularly across industrial, healthcare, childcare, convenience retail and premium freestanding investments.”