Among properties that sold the day after federal budget was this fully leased dual occupancy site, with future development upside (STCA) in Devonport, Tasmania which had a price tag of $1.18m (plus GST).
Experts warn Treasurer Jim Chalmers’ tax overhaul could reshape where mum-and-dad investors put their money – with a surge predicted in areas already attracting Asian buyers.
Raine & Horne executive chairman Angus Raine said residential real estate had long been the preferred investment class for Australians, but the federal budget changes could now redirect funds into areas not impacted by negative gearing reform.
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Angus Raine, Executive Chairman of Raine & Horne.
Mr Raine said “the changes to the taxation of residential property are likely to refocus investors towards commercial properties, particularly at the mid to lower end of the market”.
“Commercial property is already a very cost-effective investment as the tenant, rather than the owner, normally pays many of the ongoing costs associated with the property.”
He said the sector was already a winner, with self-managed super funds left untouched under capital gains tax changes – a popular vehicle for mum-and-dad investors to access commercial property that could attract further inflows due to its tax appeal.
Mr Raine said the budget also made permanent the $20,000 Instant Asset Write-Off (IAWO).
“This will further add to the appeal of commercial property because small business tenants will be able to claim an instant tax break for fit-outs of their premises.”
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Mark Wizel, Founder, Your Medical Property.
According to Your Medical Property founder Mark Wizel, the smart money has been on the move into commercial real estate for a while – specifically healthcare related options.
“I am seeing this also with a lot of Asian Capital that has pivoted away from development projects in residential to longer term investment into Australian healthcare assets,” he said.
“If anything, changes to residential investment settings could see more institutional and private capital look toward defensive alternative sectors such as healthcare property, particularly assets with stable income and long-term occupiers.”
“I think the changes to residential CGT etc are a big positive for the commercial property sector personally.”
He said at this stage, they saw the healthcare property sector “relatively insulated from many of the policy discussions impacting residential real estate”.
“Healthcare demand is fundamentally driven by demographics and necessity rather than discretionary investment cycles. People will continue to require treatment, diagnostics, and specialist care regardless of tax settings or economic conditions.”
“This in turn makes it a very attractive and highly defensive asset class for investors to invest capital into.”
Vanessa Rader, Ray White Group head of research.
Ray White Group head of research Vanessa Rader said “for some private investors, this budget may be the prompt to consider diversifying into commercial property for the first time”.
“The income yields are compelling, averaging above residential yields across most commercial assets, often with long leases and sticky tenants providing income certainty that residential investment rarely matches.”
She said “investors who previously used residential property as their primary wealth-building vehicle may find the commercial sector increasingly worth examining as the tax settings around residential tighten”.
She said commercial property retained its existing deductibility framework in this Budget which could create a “meaningful incentive shift” for investors weighing up their options.
“For investors reassessing their portfolio strategy, commercial property retains full deductibility of losses against other income and offers no restriction on asset type,” she said.
“In that narrow sense, commercial property becomes comparatively more attractive for investors who were previously active in residential.”