Property investment body cautions investors against prioritising high-yield properties following negative gearing and CGT reforms
The Property Investment Professionals of Australia (PIPA) has cautioned investors that federal Budget reforms to negative gearing and capital gains tax (CGT) are encouraging risky decision-making, with some buyers pursuing high-yield properties at the cost of long-term capital growth.
PIPA chair Cate Bakos (pictured top) said the tax changes were likely to drive heightened interest in regional properties, small units and apartments, non-standard title types, commercial assets, and other cash flow-oriented investments.
"Positive cash flow may appear more valuable now that first-time investors no longer have access to negative gearing tax offsets unless they purchase brand-new property," she said. "It helps service debt, provides resilience against rising interest rates, and offers liquidity. But cash flow alone does not build wealth, because capital growth remains the cornerstone of successful property investment over the long-term."
For Bakos, the tax reforms had made the investment landscape more complicated, with some less experienced advisers potentially recommending asset classes beyond their knowledge base.
"Consumers must ask their advisers for their experience in recommending regional or commercial assets," she said. "Do they understand the growth fundamentals of these markets, or are they simply chasing yield? Without proven expertise, investors could be steered into properties that look good on paper but fail to deliver capital appreciation."
She urged investors to weigh cash flow against core growth considerations, including location quality, demand drivers, and supply constraints.
"Spruikers often emerge in times of policy change, promoting properties that may not withstand professional scrutiny," she said. "Some of these higher risk properties may include internal floor areas that fall short of lending policy, or unusual title types that may require a significantly higher deposit than traditional residential options."
Bakos said the Budget reforms had altered the tax settings but not the underlying principles of sound investment.
"Cash flow is important for sustainability, but capital growth is what compounds returns and builds wealth over time," she added. "Investors must ensure their advisers are qualified, experienced, and aligned with their long-term goals.
"It's vital that investors understand that poor advice can have long-lasting financial consequences with longstanding principles more important than reactionary pivots."
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