If you’ve been thinking about property investment, you’ve probably asked the same question most people do: Should I buy established, or build new? It’s a fair question, especially as prices of established homes continue to rise.
When done right, purchasing a house-and-land package can be one of the most financially effective ways to build long-term wealth through property.
Why build new?
A brand-new property offers advantages that older homes can’t match. First, everything is under warranty. In the early years of ownership, maintenance costs are typically lower, which helps protect your cash flow.
Modern homes also attract strong rental demand. Families and long-term tenants are drawn to energy-efficient heating and cooling, better insulation and layouts designed for contemporary living. That can translate to lower vacancy rates and longer tenancies.
The financial benefits of building new
Depreciation
Depreciation is one of the most important financial advantages of investing in a new property. The Australian Taxation Office allows investors to claim deductions for the wear and tear on an investment property over time. New builds generally provide higher depreciation benefits than established homes, particularly in the early years.
There are two main components:
1. Capital works (building depreciation) covers the structural elements like the concrete slab, walls and roof. These are generally claimable over 40 years.
2. Plant and equipment includes the removable items like ovens, carpets, blinds and air-conditioning units, which depreciate more quickly and can generate substantial deductions upfront.
A quantity surveyor prepares a depreciation schedule, which is usually tax-deductible, and the deductions are claimed annually through your tax return. For PAYG income earners, this can meaningfully reduce your tax bill each year.
Stamp duty savings
Another key benefit of buying land and building in Victoria is how stamp duty is calculated. When you purchase land separately and then enter into a construction contract, duty is assessed on the land value only, not the completed home. Compared to buying an established property at the same end value, the difference can be significant.
Victoria also currently offers stamp duty savings for certain off-the-plan townhouse and apartment purchases. Under the concession available until 20 October 2026, the dutiable value can be reduced by deducting construction costs incurred after the contract date. While this doesn’t eliminate stamp duty, it can reduce upfront costs for investors.
The financial considerations of building new
While the strategy has advantages, investors need to understand the full cost picture.
Upfront expenses include the land purchase price, stamp duty on the land component and progress payments to the builder. Site costs, upgrades and variations can add up quickly if not carefully managed.
It’s equally important to plan for holding costs during construction. Because the property isn’t producing rental income yet, you’ll need to cover loan repayments, council rates, water rates, insurance and any applicable land tax from your own cash flow. This is one of the most common areas where investors underestimate the commitment.
Finally, professional costs, including accounting advice and drawing up your depreciation schedule, should also be factored in.
How construction finance works
Financing a build is different from a standard mortgage. Rather than receiving the full loan amount at settlement, the lender releases funds progressively as construction milestones are completed.
You’re charged interest only on the amount drawn, which helps manage costs during the build. However, because there’s no rental income during construction, you must have a buffer in your savings to cover these interest-only payments until a tenant moves in.
Loan structure also makes a real difference. Keeping the loan interest-only during construction can reduce holding costs while the property isn’t generating income. Once the build is complete, your construction loan converts to a standard investment property loan, and what you decide about interest-only vs. principal and interest, offset accounts and investment-specific structuring all affect your long-term cash flow position.
Is this strategy right for you?
Building an investment property in Victoria isn’t a shortcut strategy. It suits investors with a long-term mindset, stable income and the ability to manage a construction period without rental returns.
For first-time investors and PAYG earners, the depreciation benefits and tenant appeal of new builds can make this attractive. For experienced investors, it can be a way to add modern, low-maintenance stock to an existing portfolio.
The key is ensuring the location fundamentals are sound and the finance structure supports your broader wealth strategy.
Thinking about building in Victoria?
Before you sign a land contract or commit to a build agreement, it’s worth having a proper conversation about your borrowing capacity, cash flow and loan structure – not just whether you can get approved.
At Mortgage Domayne, we work with investors to ensure their finance is structured in line with their investment goals, tax position and lifestyle. That includes detailed cash flow and borrowing capacity modelling so you know what you can afford and comfortably sustain throughout construction.
House-and-land packages involve moving parts that a standard purchase doesn’t, including progress payments and lender requirements. Coordinating these properly can make a real difference to how smoothly your build runs.
If you’re thinking about building an investment property in Victoria, talk to the team at Mortgage Domayne before you commit to anything. Contact us to get your finance structure right from day one. Call us on 1300 366 296 or fill in this enquiry form.
Disclaimer: This guide provides general information only and does not constitute financial or tax advice. Individual circumstances vary.
Frequently asked questions
Is building an investment property in Victoria cheaper than buying established?
It can be more cost-effective upfront because stamp duty is generally calculated on the land value only. New builds may also offer higher depreciation and lower early maintenance costs. However, construction costs need to be factored in.
How does a construction loan work?
Funds are released in stages as the build progresses, and you pay interest only on the amount drawn. Because there’s no rental income during construction, having a cash buffer is essential to cover your repayments.
When can I claim depreciation on a new build in Victoria?
You can start claiming depreciation once the property is completed and available for rent. A quantity surveyor prepares a depreciation schedule outlining your annual deductions.
