Uncategorized

May 14, 2026
By Shelley James

The Federal Budget 2026

How the budget reforms could reshape Sydney Property Development

The 2026 Federal Budget may prove to be one of the most significant turning points for Australian property investors, developers, and landowners in recent decades. With proposed changes to Capital Gains Tax (CGT), negative gearing, and discretionary trust structures, the Government is signalling a major shift in how residential property investment will operate moving forward.

For Sydney’s development sector, however, the changes may also create opportunity.

As the market adapts, there is likely to be an increasing focus on new residential developments, strategic project structuring, and experienced development management to help navigate changing conditions.

At 756Group Pty Ltd, we believe the developers who adapt early, structure intelligently, and remain disciplined in project delivery will be best positioned to succeed in the next phase of the Sydney property market.

So what are the key budget changes affecting property developers and investors?

Restricting negative gearing benefits largely to new residential developments
Replacing the traditional 50% CGT discount with an inflation-indexed model
Introducing increased scrutiny around discretionary trust structures
Encouraging investment into projects that create additional housing supply

While the reforms are still subject to legislation, they are already influencing conversations across the Australian property development industry.

For Sydney developers in particular, the direction is clear – projects that deliver new housing stock may become increasingly attractive to both investors and owner-occupiers.

Why New Developments May Become More Attractive

Under the proposed changes, investors purchasing established residential property may lose access to many of the tax advantages that have historically driven investment demand.

New developments on the other hand may continue to retain:

This could have several impacts across the Sydney property market including increased demand for new apartments and townhouses.

The broader intention behind the latest reforms appears to be encouraging investment into the creation of new housing supply rather than the continued trading of existing residential “stock”.

In practical terms, the Government is attempting to redirect investor capital toward projects that deliver additional homes into the market. This may create stronger demand for developments that can offer new residential product in undersupplied areas across Sydney and wider Australian property markets.

As a result, projects delivering new apartments, townhouses, mixed-use developments, and build-to-rent accommodation may become increasingly attractive to both investors and developers seeking assets that continue to provide tax effectiveness under the proposed rules.

This could particularly benefit the following projects in well-connected growth corridors;

Greater Focus on Feasibility and Project Structuring

As margins tighten and tax settings evolve under the latest proposed Federal Budget reforms, developers may need to place greater emphasis on feasibility analysis, acquisition strategy, funding structures, and overall delivery efficiency.

In previous Sydney property cycles many projects were able to rely on strong market growth to absorb rising costs, delays, or inefficiencies. Increasing property values often helped preserve profitability even when projects encountered challenges along the way.

The proposed changes to negative gearing and Capital Gains Tax may now shift that dynamic.

As investor demand potentially becomes more focused on new developments rather than established residential stock, developers may face greater pressure to ensure projects are strategically structured and aligned with changing buyer and investor expectations from the outset.

For example, a medium-density development site in Sydney’s Inner West or South-West Growth Corridor may previously have relied heavily on continued market appreciation to improve feasibility outcomes over time. Under changing market conditions developers may now need to place greater focus on realistic end values, funding costs, project timing, and product mix before proceeding. In simple terms, projects may no longer be able to rely solely on market growth to “carry” feasibility.

Instead, successful developments are likely to depend increasingly on disciplined planning and strong, proactive development management throughout the project lifecycle.

At 756Group Pty Ltd, we assist developers, investors, and landowners in navigating changing market conditions through commercially focused development management that is designed to help protect project viability from acquisition through to delivery.

What this Could Mean for Light Industrial Property?

While much of the discussion surrounding the Federal Budget has focused on residential property, light industrial assets may also become increasingly attractive for certain investors and developers.

Unlike established residential property, well-located industrial assets are often driven more heavily by underlying business demand, logistics requirements, and warehousing needs rather than purely residential tax incentives.

In markets such as Sydney, where industrial land remains tightly held and supply constrained, light industrial developments may continue to perform strongly due to many reasons including:

For some developers and investors, this may create an opportunity to diversify away from traditional residential investment exposure while still participating in active development opportunities.

There may also be increasing interest in mixed-use projects that combine residential and light industrial or commercial elements, particularly in areas undergoing urban renewal or rezoning.

However, light industrial projects require careful planning and feasibility assessment. Construction costs, planning controls, tenant demand, access requirements, and leasing strategy all play a significant role in overall project viability.

In some cases, light industrial developments may offer stronger rental yields, longer lease terms, reduced tenant turnover, and less exposure to some of the tax policy changes affecting residential investors.

That said, every project and location is different, and developers should avoid assuming that industrial assets automatically present lower risk.

So, What Does This Mean for the Sydney Property Market?

While some investors may step back from established residential property, the reforms could create renewed momentum for projects that deliver genuine housing supply.

For developers prepared to adapt, this may present opportunities to:

Sydney continues to face significant housing shortages, and quality developments in well-located areas are likely to remain in strong demand.

The developers who succeed over the next decade may not necessarily be the largest – they may simply be the most disciplined, adaptable, and strategically managed.

What Could the New Reforms Mean for Distressed Property Owners

The proposed Federal Budget reforms may create both opportunities and challenges for distressed property owners, developers, and investors across the Sydney market.

As the Government attempts to encourage investment into new housing supply rather than existing residential stock, some established property owners may experience increased financial pressure, particularly where projects are already facing funding challenges, or reduced feasibility margins.

For distressed property owners one potential downside may be softer investor demand for certain established residential assets if tax advantages become less attractive under the proposed reforms. This could place additional pressure on projects or sites that were originally acquired under different market assumptions.

At the same time the reforms may also create new opportunities.

Developers and investors seeking projects that still align with the new policy direction may increasingly pursue:

In some cases, distressed sites with strong underlying fundamentals may become attractive acquisition or even joint venture opportunities where experienced project management and strategic restructuring can unlock value. This is likely to place greater importance on early feasibility review and disciplined development management.

At 756Group Pty Ltd, we work closely with developers, investors, and landowners to help navigate changing market conditions through practical and commercially focused development management strategies. This may involve reassessing project feasibility under the proposed reforms, identifying opportunities to reposition projects toward stronger market demand, reviewing staging or delivery strategies, coordinating consultants and authorities, and helping clients make informed decisions around project viability and risk.

In changing market conditions, distressed projects do not always require abandonment – in many cases, careful planning, strategic restructuring, and experienced project oversight may help stabilise projects and improve long-term outcomes.

Taking a Balanced Approach in a Changing Market

While the proposed reforms may create new opportunities across the Australian property development industry, it is important for developers and investors not to react too aggressively before the legislation is formally finalised and ironed out.

Market conditions, tax policy, and lending environments can all continue to evolve, and decisions made too quickly may create unnecessary risk if details change or market sentiment shifts unexpectedly.

At the same time, doing nothing may also leave some developers unprepared for changing conditions.

For many in the Sydney property development market, the most sensible approach may be a balanced one. Rather than rushing into acquisitions or major restructuring decisions, developers can begin taking practical and measured steps now to better prepare their projects and portfolios for potential future changes.

This may include reviewing current development pipelines to ensure projects remain commercially viable under different market conditions, reassessing project feasibilities against rising construction and holding costs, and considering whether existing project structures still align with long-term objectives.

In simple terms, it is about making sure projects still “stack up” if market conditions tighten further.

Developers may also benefit from taking a closer look at project timing, funding strategies, consultant coordination, and delivery programmes to identify opportunities to improve efficiency and reduce unnecessary risk.

Periods of market uncertainty often reward disciplined and well-prepared developers rather than those making reactive decisions.

At 756Group Pty Ltd, we work closely with clients to help assess project viability, identify potential risks early, and implement practical development management strategies designed to support informed and commercially focused decision-making in changing market conditions.

756Group is here to help!

At 756Group Pty Ltd, we understand that successful property development is not simply about securing a site. It is about managing risk, protecting feasibility, and maintaining project momentum from acquisition through to completion.

In evolving market conditions such as those proposed under the 2026 Federal Budget, developers require clear strategy, commercial discipline, and experienced oversight.

Our team assists clients across Sydney and wider Australian property markets with:

Development Management
Project Feasibility Analysis
Consultant Coordination
Authority Approvals
Procurement Strategy
Programme Management
Risk Mitigation
Project Delivery Oversight

We work closely with developers, investors, landowners, and private capital groups to help navigate increasingly complex market conditions while keeping projects commercially focused and outcome driven.

While the full impact of the 2026 Federal Budget reforms will take time to unfold, the direction of the market is becoming increasingly clear. Greater emphasis is likely to be placed on new housing supply as well as commercially viable development outcomes.

For Sydney developers, investors, and landowners, the ability to adapt strategically and navigate changing market conditions with confidence may become one of the most important drivers of long-term success.