The rise of the “never-sell” investor

A shift in structures

When tax settings change, investor behaviour is highly likely to change with it.

Accountants, advisers and financial planners are likely to see an increase in conversations around ownership structures and long-term tax planning.

Trusts, companies and self-managed superannuation funds may receive increased attention as investors reassess how they hold assets.

The objective will be to reduce personal tax exposure and manage capital gains more strategically over time.

Direct individual ownership in your personal name has historically been the most common structure for small-scale property investors. If CGT concessions are reduced, that approach may lose its appeal.

Company structures, while currently ineligible for the CGT discount, offer certainty around corporate tax rates and long-term planning flexibility. For some investors, that trade-off may become increasingly attractive.

Tax reform by itself doesn’t eliminate incentives, it simply redirects them.

Commercial property’s appeal

Another unintended consequence of CGT reform could be a gradual shift toward commercial property.

If residential investing becomes less attractive from a tax perspective, capital may begin flowing toward asset classes where income rather than capital gains drives investment decisions.

Commercial property is typically assessed differently, where investors focus on rental yield, tenant quality, lease duration and capitalisation rates.

If CGT becomes less favourable, the relative importance of income increases.

In that environment, commercial assets offering stable rental income could attract stronger investor demand. Increased capital flows into those markets would likely place downward pressure on cap rates, particularly in sectors that offer defensive income profiles.

The result may not be a withdrawal of investor capital from property altogether, but rather a redistribution across different property sectors.

The issue of reform

The central issue of CGT reform is that policies designed to weaken investor activity may instead turn investors into long-term holders.

We may see lower transaction volumes, more sophisticated ownership structures and a stronger focus on income-producing assets.

The small, passive investor purchasing a single negatively geared property in the hope of future price appreciation may go away entirely.

Housing markets are adaptive. When selling becomes expensive, capital does not disappear. It finds other options.