Affordable Property Is Booming, But the Federal Budget May Change the Buyer Pool

There is a simple reason affordable property has been running hard.

People still need somewhere to live, but borrowing capacity has been squeezed. Interest rates, household costs, insurance, owners corporation fees, building issues and general uncertainty have all made buyers more cautious.

When buyers cannot stretch to the property they really want, they start looking at the property they can afford.

That is why lower priced homes, older units, entry level apartments and outer suburban properties have attracted attention. In many cases, they have looked like the only realistic way into the market.

But there is now another issue sitting underneath the surface.

The Federal Budget has announced major changes to the tax treatment of residential investment property. From 1 July 2027, the Government says negative gearing will be limited to new builds, with existing arrangements unchanged for properties held before Budget night. Investors who buy established housing after Budget night will still be able to deduct losses against residential property income, but will not be able to deduct those losses against other income such as wages. The Budget also says the 50 per cent capital gains tax discount will be replaced with cost base indexation and a minimum 30 per cent tax on capital gains from 1 July 2027.

That matters because affordable property is not one single market.

Some affordable properties are genuinely good owner occupier homes. They are close to transport, schools, shops, medical services and employment. They suit first home buyers, downsizers, young families or single buyers trying to get a foothold.

Other affordable properties are affordable for a reason.

They may be in large apartment buildings with high owners corporation fees.

They may rely heavily on investor buyers.

They may have poor natural light, small floor plans, cladding concerns, short term rental issues, limited parking, difficult access, or future maintenance problems.

They may look cheap on the purchase price, but expensive once the real holding costs are understood.

The key question for a purchaser is not simply, “Can I afford to buy this property?”

The better question is, “Who will want to buy this property from me later?”

That is where the Budget changes may become important.

If investor demand for established property weakens, some properties may have a thinner buyer pool. That does not mean all affordable property will fall in value. It does mean purchasers should be more careful about buying property where the main future buyer is likely to be another investor.

A good property should have more than one possible buyer.

It should appeal to someone who wants to live there.

It should appeal to someone who can see long term value.

It should not rely entirely on tax treatment, rental yield or the hope that another investor will come along later and pay more.

In Victoria, this is especially relevant for small apartments, older unit blocks, large owners corporation developments, investor heavy suburbs and properties with unusual defects or limitations.

The price might look attractive today.

But if future investors become more selective, the resale market may not be as forgiving.

There is also a practical conveyancing point here.

A contract review is not just about checking whether the names, title details and settlement dates are correct. Those things matter, but they are only part of the picture.

A purchaser should also understand what they are buying.

That includes checking the title, plan, easements, owners corporation information, planning controls, building works, special conditions, settlement terms and any unusual disclosures in the Section 32 Vendor Statement.

If the property is part of an owners corporation, the certificate and rules matter.

If there are high fees, special levies, cladding issues, water ingress, major capital works, disputes or insurance concerns, those matters should not be brushed aside.

If the contract contains unusual special conditions, the purchaser should know that before signing, not after the problem appears.

If the property is being bought at auction, the purchaser needs to understand that the contract is generally accepted on a take it or leave it basis. There is no cooling off period after a successful auction purchase in Victoria.

If the purchaser is making an offer before auction, that is different. There may be an opportunity to request changes to the contract, including finance, building and pest, settlement timing and property condition clauses.

The Budget has not changed those basic conveyancing principles.

But it may change how buyers should think about risk.

For years, many purchasers have assumed that cheaper property is automatically safer because the entry price is lower. That is not always right.

A low purchase price can still be a bad buy if the property is hard to insure, hard to finance, hard to rent, hard to live in or hard to sell.

Affordable does not always mean low risk.

Sometimes affordable means the market has already priced in a problem.

The Budget changes are aimed at supporting home ownership and shifting tax support towards new housing supply. The Budget papers estimate that the tax changes may support an additional 75,000 homeowners over the decade.

Whether that outcome occurs will be debated by economists, investors, renters, builders and politicians.

For a buyer sitting at the kitchen table with a contract in front of them, the practical issue is much simpler.

Do not buy just because the price looks low.

Do not assume a cheap unit is automatically a safe first step.

Do not ignore owners corporation problems.

Do not rely on the selling agent’s enthusiasm.

Do not assume that the same buyer pool will be there when you sell.

Before signing, ask:

Who is the likely future buyer?

Is this property attractive to owner occupiers?

Does it depend too heavily on investors?

Are the owners corporation fees reasonable?

Are there known building, cladding, waterproofing, structural or maintenance issues?

Is the contract fair, or does it shift too much risk onto the purchaser?

Is the settlement date realistic?

Are there finance, building and pest, or property condition protections in the contract?

In a changing market, the safest property is not always the cheapest property.

The safer property is the one with broad appeal, clean documentation, manageable costs and fewer hidden traps.

That is where proper contract review matters.

At Victorian Property Settlements, we look at the contract and Section 32 Vendor Statement before you sign, so you understand the risks sitting in the paperwork and the practical issues that may affect your purchase.

The Federal Budget may change the investor landscape, but the basic rule remains the same.

Buy the property that makes sense today and still makes sense when you need to sell it tomorrow.

General information only. This article is not legal advice. Victorian Property Settlements provides conveyancing advice as licensed conveyancers in Victoria. For legal advice, you should speak with an Australian legal practitioner.