Sponsored ContentPartner ContentThu 06 Aug 26
How Tax Reform Could Shift Capital Toward New Housing
Recent changes to negative gearing and capital gains tax (CGT) are likely to redirect a share of investor capital away from established housing and toward new residential development.
The reforms include grandfathering provisions for existing properties, reducing tax advantages for new investment in established homes and making new builds the more attractive option for capital.
Trilogy Funds head of lending Clinton Arentz said the budget had brought a level of clarity the market had been missing.
“The fact that it drives investors to new product is not a bad thing at all. That’s where the demand for development finance is,” Arentz said.
Investor lending currently runs at about $160 billion per year, according to Australian Bureau of Statistics data, yet only an estimated $40 billion to $45 billion of that goes into the purchase of new builds annually.
The gap between available capital and new housing supply means even a modest shift in how investors allocate funds could generate substantial demand.
Arentz said Trilogy Funds was already seeing the early signs of that shift.
“If the litmus test is developer appetite, we’re seeing the strongest level of developer appetite for quite some time,” he said.
“Demand moves quite quickly. When there are price or appetite adjustments from investors or buyers, you see that in the numbers fast.”
Trilogy Funds’ lending model is structured around the small-to-medium development projects that, in aggregate, make the most meaningful contribution to housing supply.
The firm focuses on projects up to $50 million in debt size. These are typically townhouse and apartment developments that can be delivered within 12 to 18 months, well inside the five-to-seven-year timeline of a large residential tower.
“At any given time, we’ve got dozens and dozens of those projects rolling through,” Arentz said. “None of which typically make headlines, and yet they’re all going some way toward solving the housing crisis by providing more supply.”
Finance for those projects is delivered through the Trilogy Monthly Income Trust, a pooled mortgage fund with more than $1 billion in funds under management that has operated continuously for nearly two decades.
The trust lends exclusively on a first-mortgage basis, with loan-to-value ratios of up to 70 per cent, providing construction, bridging and investment refinance pathways that align with project delivery milestones.
That is where Trilogy Funds differs most from traditional banks, which are constrained by rigid presale thresholds and standardised credit frameworks.
“We can tailor our solution to the project’s needs,” Arentz said, with the firm’s assessment process considering project merit, development experience, risk mitigants and borrower financial strength.
As policy-driven demand concentrates in the new development sector, the ability to secure funding quickly is likely to determine which projects capture the opportunity and which do not, Arentz said.
“Over the next few months, the market will adjust to policy changes introduced in the budget and investors will get used to the new normal,” Arentz said. “The underlying market thesis is still there. There’s still plenty of demand and there is plenty of capital available.”
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