Meriton founder Harry Triguboff says investors will swarm new apartment builds after CGT changes

After repeated denials, Federal Labor has scrapped negative gearing on existing homes and abolished the 50 per cent capital gains tax discount from July 1, 2027.

Despite intense property industry displeasure, including a noted decrease in auction clearances, Meriton, the nation’s largest private apartment developer, said it recorded a 20 per cent increase in the number of investors visiting Meriton display centres coupled with an increase in apartment sales last weekend. The interest was in projects stretching from Cypress Palms on the Gold Coast to the Castle Grange development in Sydney’s Castle Hill.

The surge of investor interest in new apartments was echoed by Ben Stewart, director of SRM Residential, representing multi-billionaire developer Sam Arnaout, as well as several other property moguls including the head of Aland, Andrew Hrsto, and Nicholas Couloumbis of Toohey Miller & Co.

“I’ve seen a definite increase in interest from investors in one and two bedroom brand new apartments for negative gearing,” Mr Stewart said, adding that he sold a one-bedroom apartment in Mr Arnaout’s Queensgate development in inner Sydney Potts Point over the weekend for a hefty $2.5m.

“There’s a number of parties interested at The Walden by Aland in North Sydney there’s also definitely been an increase in activity with a number of deposits taken,” he said.

Meanwhile Mr Triguboff, in a statement to The Australian said there has been “a massive boost in sentiment from many buyers who were sitting on the fence.”

“Last weekend, being the first since the federal budget delivery, identified positive proposed changes to capital gains tax and negative gearing for brand-new property,” said Mr Triguboff, Australia’s richest man.

“Investment in new apartments continues to offer existing and enhanced tax benefits, with the flexibility to choose between the existing CGT discount and the new inflation-adjusted indexation method,” he said.

“In a high-inflationary climate, the new proposed method may be more beneficial, alternatively the current 50 per cent CGT discount method will continue to save dollars in a low-inflation, high-property-growth environment.

“The advantage is that investors can choose, at the time of sale, the method that best suits their circumstances and the economic environment,” he said. “Savvy investors have done their maths … this is supported by recent sharemarket sell-offs, which have driven a reallocation of capital from equity portfolios to physical real estate.”

Mr Triguboff, who is worth $30bn, noted that the Australian stock market experienced a significant downturn last Monday, dropping to a seven-week low. The main Australian benchmark, the S&P/ASX 200 fell 125.5 points (down 1.45 per cent) to close at 8.505.3, recording a year-to-date loss of approximately 2.3 per cent.

“Buyers are pivoting from the share market back into property and this is a direct result of the Budget. Brand-new apartments are now top of the list for investors after the federal budget reforms protected and exempted new builds from cuts to negative gearing and capital gains tax.”

Mr Triguboff added that over the past few years, 50 per cent of his sales were financed by his finance arm, Meriton Property Finance, but surprisingly, this week only 13 per cent of our buyers opted for our finance, which is a clear sign the market has turned for the better.

“We expect our banks to respond accordingly and lend money on what is the safest asset there is,” he said.

Apart from investors, Meriton’s attraction for first home buyers is also improving, sourcing assistance from the bank of Mum and Dad to help with the purchase.

“Mums and Dads are waking up to the fact that the CGT discount that previously applied to shares or other asset classes is no longer available. They are pivoting away from shares and diversifying their cash to properties for themselves or their kids.”

Brand-new property still qualifies for the full CGT discount and all negative gearing benefits. Comparing property to an equity portfolio is becoming impossible to justify, Mr Triguboff said.

This story by Lisa Allen first appeared on The Australian