Budget 2026: Established vs New Build: Which Is Better for a $900k Melbourne Investor on a $130k Income?

Established or New Build? The $900k Melbourne Investor Question

One of the biggest questions Melbourne property investors are asking right now is simple:

“Should I buy an established property or a brand-new build?”

It used to be a simple question, until the Budget 2026 announcement. It is now no longer a simple question. You almost need an accounting degree and a crystal ball to answer that.

After the 2026 Federal Budget changes, where negative gearing benefits are being reshaped to favour new residential properties. The Government’s Budget explainer states that negative gearing benefits are being limited to new residential properties, while losses on established residential properties purchased after the relevant cut-off may no longer be immediately offset against salary and wage income.

That sounds like a win for new builds. But property investing is not just about tax.

It is about rent, land value, tenant demand, holding cost, resale depth, scarcity, depreciation, maintenance risk and long-term capital growth.

Tax benefits can help you hold the property. They do not automatically make it a good property.

Let’s look at the numbers.

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The Scenario: $900k Purchase, $130k Income

For this comparison, let’s use a realistic Melbourne investor profile.

Assumptions

Assumption	Figure
Investor income	$130,000 p.a.
Purchase price	$900,000
Loan	$720,000
Loan-to-value ratio	80%
Interest rate	6.25% interest-only
Inner-metro established rent	$700 per week
Outer-ring new build rent	$600 per week

For someone earning $130,000, the investor generally sits around the 30% marginal tax bracket, before Medicare levy, under current Australian resident tax rates.

For simplicity, we will use an approximate 32% tax benefit, allowing for Medicare levy.

Disclaimer: This is not tax advice. It is a practical investment modelling exercise.

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Option 1: $900k Established Inner-Metro Property

Let’s say the investor buys an established townhouse, villa unit or modest house in an inner or middle-ring Melbourne suburb. It costs $900,000 and rents for $700 per week.

Annual Rental Income

Item	Amount
Rent: $700 x 52 weeks	$36,400

Estimated Annual Holding Costs

Item	Estimate
Interest on $720,000 at 6.25%	$45,000
Property management, approx. 7.7% incl. GST	$2,803
Council, water, insurance	$4,500
Maintenance allowance	$2,500
Land tax estimate	$2,050
Total annual cost	$56,853

Victoria land tax is based on the taxable value of landholdings, not the total purchase price of the property. Investment properties are generally assessable unless an exemption applies.

Established Property Cash Flow

Item	Amount
Rental income	$36,400
Less holding costs	-$56,853
Pre-tax cash shortfall	-$20,453 p.a.
Weekly shortfall	-$393 per week

Under the new policy direction, if this is an established residential investment property purchased after the relevant cut-off, the investor may not be able to immediately offset that rental loss against salary income. Industry summaries of the Budget measures describe this as established-property rental losses being quarantined rather than freely offset against wage income.

So the investor may need to carry the full cash shortfall.

That is roughly:

$20,453 per year out of pocket

About $393 per week

Not catastrophic. But not loose change either.

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Option 2: $900k Brand-New Outer-Ring Property

Now let’s say the investor buys a brand-new house-and-land package or new townhouse in an outer-ring Melbourne suburb.

Same purchase price: $900,000.

But the rent is lower: $600 per week. (optimistically)

This is common. A brand-new property can look attractive on tax, but the location may not command the same rent as a stronger inner or middle-ring suburb.

Annual Rental Income

Item	Amount
Rent: $600 x 52 weeks	$31,200

Estimated Annual Holding Costs

Item	Estimate
Interest on $720,000 at 6.25%	$45,000
Property management, approx. 7.7% incl. GST	$2,402
Council, water, insurance	$4,500
Maintenance allowance	$1,000
Land tax estimate	$1,475
Total annual cost	$54,377

New Build Cash Flow Before Tax

Item	Amount
Rental income	$31,200
Less holding costs	-$54,377
Pre-tax cash shortfall	-$23,177 p.a.
Weekly shortfall	-$446 per week

Before tax, the new build is actually worse. Why?

Because it rents for $100 per week less.

That is $5,200 less rent per year.

The slightly lower maintenance and land tax estimate does not fully offset the weaker rental income. So before tax, the new build is approximately:

$2,724 per year worse than the established property

This is where the conversation gets interesting.

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Tax Changes the Story

The major advantage of the new build is that it may still qualify for negative gearing.

The 2026 Budget reform package is centred on limiting negative gearing for residential property to new builds, while changing capital gains tax treatment more broadly.

That means the new build may still allow the investor to offset rental losses against salary income, subject to the final rules and personal circumstances.

Scenario A: New Build Without Depreciation

Item	Amount
Cash loss	-$23,177
Approx. tax benefit at 32%	+$7,417
After-tax cash shortfall	-$15,760 p.a.
Weekly after-tax shortfall	-$303 per week

Compared with the established property, the new build could be around:

$4,693 per year better in after-tax cash flow

About $90 per week better

This can be significant for an investor earning $130,000.

Scenario B: New Build With Depreciation

Brand-new properties may also provide depreciation benefits.

Let’s use a simple example of $10,000 per year in depreciation.

Depreciation is not a cash expense. You do not physically pay it each year. But it may increase the taxable loss, which may improve the investor’s tax position.

Item	Amount
Cash loss	-$23,177
Depreciation allowance	-$10,000
Taxable loss	-$33,177
Approx. tax benefit at 32%	+$10,616
After-tax cash shortfall	-$12,561 p.a.
Weekly after-tax shortfall	-$242 per week

Now the new build looks much better from a holding-cost perspective. Compared with the established property, the new build may be around:

$7,892 per year better in after-tax cash flow

About $152 per week better

This is the number many project marketers and property spruikers will focus on.

To be fair, they are not completely wrong. The new build may genuinely be easier to hold. But that does not automatically mean it is the better investment.

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What About the Resale Value?

This is where most investors do not think deeply enough — and it is almost never properly factored into the purchase decision. The picture becomes even murkier when you start considering the future resale value of the property.

Under the old system, many investors did not need to worry too much about whether a property was established or brand new from a resale perspective. Or at least, the difference was not as significant when comparing similar property types. An investor buying an established property and an investor buying a new build could often access similar tax treatment, so the resale gap was less obvious.

Under the new Budget 2026 changes, buying a new property is a bit like buying a new car. The new property can only be new once. The tax benefit attached to a new property may disappear the moment it is resold. Once the first owner sells it, the property becomes just another established property in the eyes of the next buyer.

At that point, future buyers will compare it against other established properties in the market. And when that happens, the property with the stronger fundamentals will win. That means location, land value, scarcity, build quality, rental demand, owner-occupier appeal, school zones, transport, amenities and resale depth become critical. The property with better fundamentals is more attractive, and thus tends to fetch better resale price.

In simple terms:

A new build may win on tax when you buy it. But the better property wins when you sell it.

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The Real Question: Cash Flow or Capital Growth?

Here is where investors need to have a goal. What do you want from the property? How does the property fit into your portfolio and goals?

The new build may save the investor roughly $5,000 to $8,000 per year in after-tax cash flow. But what happens if the established inner-metro property grows faster (which it usually is)?

On a $900,000 property, a small difference in annual capital growth can completely wipe out the new build’s cash-flow advantage.

Extra capital growth from established property	Dollar difference
1% p.a. stronger growth	$9,000 per year
2% p.a. stronger growth	$18,000 per year
3% p.a. stronger growth	$27,000 per year

This is the part investors often miss. A new build might save you $7,000 a year in tax-adjusted holding cost. But if it underperforms by 1% per year in capital growth, the established property may still come out ahead.

And in Melbourne, a 1% growth gap between a scarce, well-located established property and an outer-ring new build is not hard to imagine. It is available from data sources. In fact, it is often the difference between buying a real asset and buying a glossy brochure with a floor plan.

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In Summary: Established vs New Builds in Melbourne

Category	Established Inner-Metro Property	Brand-New Outer-Ring Property
Purchase price	$900,000	$900,000
Investor income	$130,000 p.a.	$130,000 p.a.
Loan amount	$720,000	$720,000
Interest rate assumption	6.25% interest-only	6.25% interest-only
Weekly rent	$700	$600
Annual rent	$36,400	$31,200
Annual interest cost	$45,000	$45,000
Pre-tax cash shortfall	-$20,453	-$23,177
Negative gearing benefit	Limited/quarantined under new rules	Likely available
Depreciation benefit	Lower	Higher
After-tax shortfall, no depreciation	-$20,453	-$15,760
After-tax shortfall, with depreciation	Not modelled	-$12,561
Cash-flow winner		New build
Likely capital-growth winner	Established

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10 Year Scenario

This is where things can get exciting. Give, most property owners hold on to a property for about 10 years, let's look at what happen in 10 years:

10-Year Wealth Impact Example

Let’s assume the new build saves the investor around $7,000 per year in after-tax cash flow. That gives the new build a $70,000 cash-flow advantage over 10 years.

But if the established property grows faster, the story changes.

Growth Difference in Favour of Established	Extra Capital Growth Over 10 Years	New Build Cash-Flow Advantage	Net Position
0.5% p.a. better	Approx. $45,000	$70,000	New build ahead by $25,000
1.0% p.a. better	Approx. $90,000	$70,000	Established ahead by $20,000
1.5% p.a. better	Approx. $135,000	$70,000	Established ahead by $65,000
2.0% p.a. better	Approx. $180,000	$70,000	Established ahead by $110,000

This table is deliberately simple. It does not compound growth, and it does not include selling costs, tax on sale or loan principal changes. But it makes the point clearly.

If the established property grows only 1% per year faster, it may overtake the new build’s tax and cash-flow advantage over a long-term hold.

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Why Established Properties Can Still Win

Established properties can still be excellent investments when they have the right fundamentals.

The key advantages are:

1. Better land component

In Melbourne, long-term growth is often driven by land value. A well-located established townhouse, villa unit or house may have a stronger land-to-asset ratio than a brand-new apartment or outer-ring townhouse. Investors should always remember:

Land appreciates. Buildings depreciate.

2. Stronger tenant demand

The example shows this clearly. The established inner-metro property rents for $700 per week. The brand-new outer-ring property rents for $600 per week (and it is a very optimistic estimate). Not many outer ring tenants can afford to lease a $900k house.

That $100 weekly gap tells us something important: location still matters. Tenants pay for access, convenience, schools, transport, jobs, lifestyle and amenity. They do not just pay for stone benchtops. Inner ring properties have them all. Outer ring properties are usually in the early stages of development, thus, the lesser amenities.

3. Better resale depth

Established inner and middle-ring locations often have deeper resale demand. You are not only selling to investors. You may be selling to:

• first home buyers

• young families

• downsizers

• professionals

• school-zone buyers

• owner-occupiers wanting location

That owner-occupier demand can support prices during softer markets.

Outer-ring new builds often compete with other new builds. When you sell a five-year-old property, your competition may be a brand-new version nearby with better incentives.

That is not a fun auction room.

4. Less developer premium

Many new builds are sold with the tax benefit baked into the price. In plain English, the developer may already have captured part (if not all) of your future tax advantage in the purchase price.

The marketing spew says “tax saving”. The contract price says “thank you very much”.

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Why New Builds Can Still Make Sense

To be clear, this is not an anti-new-build argument. New builds can make sense. But they must be qualified and bought carefully.

A new build may be suitable if:

• the investor needs better after-tax cash flow

• serviceability is tight

• depreciation benefits are meaningful

• the property is genuinely scarce

• the suburb has strong population, income and infrastructure drivers

• the land component is reasonable

• the build quality is strong

• the price is not inflated by developer margin

• the resale market is not flooded with similar stock

A new build should not be bought just because it is new. It should be bought because it is a good investment that happens to be new. It is a Big difference.

Side-by-Side Summary

Item	Established Inner Metro	New Build Outer Ring
Purchase price	$900,000	$900,000
Rent	$700/week	$600/week
Annual rent	$36,400	$31,200
Pre-tax cash shortfall	-$20,453	-$23,177
Negative gearing benefit	Likely limited/quarantined under new rules	Likely available
Depreciation	Lower	Higher
After-tax shortfall, no depreciation	Around -$20,453	Around -$15,760
After-tax shortfall, with depreciation	Not modelled	Around -$12,561
Cash-flow winner		New build
Likely land/scarcity winner	Established
Likely long-term growth winner	Depends on asset quality, but often established

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Our Melbourne Buyer’s Advocate View

For a $130,000 income earner buying a $900,000 Melbourne investment property, the new build may be easier to hold after tax. While this may be the honest answer, the established property is still usually the better long-term asset, if you can afford the holding costs.

Established properties in good locations, tends to:

• appreciate faster

• attract better rent

• higher rental growth

• attract better tenants

The key question is this:

Will the established inner-metro property outperform the new outer-ring new build by more than roughly 1% per year?

If the answer is yes, then the established property may still be the better investment, even with weaker tax treatment.

If the answer is no, or if the investor cannot handle the holding cost, then a carefully selected new build may make more sense.

This is why investors should not blindly follow tax policy. Tax policy changes. Property fundamentals remain.

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My Practical Recommendation

For a $900,000 Melbourne investment budget, I would generally rank the options this way:

1. Quality established townhouse, villa unit or house in a proven suburb

This is still my preferred option where the investor can handle the cash flow.

Look for land value, scarcity, owner-occupier demand, transport, schools, low supply and strong resale depth.

2. Quality new or near-new townhouse in a strong middle-ring suburb

This can work if the price is fair and the location is not compromised. The problem is not “new”. The problem is overpriced, mass-produced, investor-targeted stock.

3. Outer-ring new build only if the numbers and fundamentals genuinely stack up

Do not buy it just because the tax treatment is better.

The property still needs to perform without the tax sugar hit.

4. Most new apartments and generic house-and-land packages

Be very careful. Many look good in a depreciation schedule and ordinary in the real market.

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Final Verdict

For this example:

• Established inner metro at $700/week gives better rent and likely stronger land-value fundamentals.

• New outer-ring at $600/week gives better after-tax cash flow, especially if depreciation is available.

• The new build may save around $5,000 to $8,000 per year in after-tax holding cost.

• But the established property only needs to outperform by about 1% per year in capital growth to potentially offset that benefit, and this is 1% target is very achieveable. Typical capital growth in Melbourne hovers between 4-10%, depending on location and property.

So the answer is not simply:

“Buy new because negative gearing.”

That is lazy advice.

The better answer is:

Buy the better asset. Then model the tax, with your income tax bracket.

For investors who can handle the holding cost, a quality established Melbourne property is usually still the stronger long-term play.

For investors with tighter serviceability or cash flow, a carefully selected new build can make sense — but only if the property is genuinely good, not just tax-friendly. Because in property investing, the tax benefit might help you survive the hold. But the asset quality determines whether the investment was worth holding in the first place.

Decision Matrix

Should you buy an Established or New Property?

Investor Priority	Better Fit	Why
Lowest holding cost	New build	Negative gearing and depreciation may improve after-tax cash flow
Stronger rent	Established	In this example, the established property rents for $100/week more
Better land value	Established	Usually stronger land component in established areas
Lower maintenance	New build	Newer property should have fewer short-term repairs
Better tax benefits	New build	More favourable under the proposed negative gearing changes
Better long-term scarcity	Established	Established inner/middle-ring locations often have deeper demand
Easier tenant appeal	Depends	New build has modern finishes; established may have better location
Better resale depth	Established	More likely to attract owner-occupiers, not just investors
Lower risk of developer premium	Established	New builds can include pricing premiums and marketing margins
Best for tight serviceability	New build	Better after-tax cash flow may help the investor hold the asset

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FAQ Established vs New Builds

Is an established property still worth buying after the negative gearing changes?

Yes, it can be. Established properties may have weaker tax treatment under the proposed rules, but they can still offer better land value, rent, scarcity and capital growth potential. The key is whether the property can outperform the new-build alternative enough to justify the extra holding cost.

Are new builds better for investors now?

New builds may be better from a tax and cash-flow perspective, especially if negative gearing and depreciation benefits are available. But that does not automatically make them better investments. A poor-quality new build in a weak location can still underperform badly.

What matters more: tax savings or capital growth?

For long-term investors, capital growth usually matters more. A tax saving of $5,000 to $8,000 per year can be useful, but a 1% difference in capital growth on a $900,000 property is worth $9,000 per year.

Should I buy a new apartment for depreciation?

Usually, be careful. Depreciation can improve cash flow, but apartments often have lower land content, higher owners corporation costs, and more resale competition. Depreciation should be a bonus, not the main reason to buy.

What is the best $900k investment property in Melbourne?

There is no single answer, but a quality established townhouse, villa unit or modest house in a strong suburb is often a better long-term investment than a generic new build in an oversupplied outer-ring estate. The right property depends on cash flow, borrowing capacity, location, land value and the investor’s goals.