Updated October 2026
CM Law’s Ultimate List: Top 50 FAQs on Buying a Residential Investment Property #37. Future Growth
Understanding future growth is an important part of buying a residential investment property. Infrastructure, population changes and planning controls can influence demand and development potential. However, a promising suburb or attractive rental yield does not guarantee a profitable investment. The purchase price, borrowing costs, tax treatment and condition of the building all affect what you ultimately keep.
For NSW buyers, the practical question is whether a property offers realistic growth prospects while remaining affordable to hold. Assess capital growth and rental cash flow together, using current evidence rather than an optimistic sales forecast.
Infrastructure and population growth
Transport improvements, employment centres, schools and services can make an area more attractive. Check whether a proposed project is merely announced, funded, under construction or operating. Look at walking routes and travel times, construction disruption and the number of competing homes planned nearby. An infrastructure announcement may already be reflected in the asking price.
ABS figures released on 17 September 2026 put NSW’s population at 8,670,100 on 31 March 2026, an annual increase of 97,000 people, or 1.1%. This supports examining housing demand, but statewide growth cannot establish that a particular suburb will outperform. Compare local household incomes, rental vacancies, employment access and new housing supply before drawing conclusions.
How zoning can increase land value per square metre
Zoning can change what a buyer is legally able to propose on a site. Where additional dwellings or floor space become feasible, developers may pay more for the same land area. The NSW Valuer General considers zoning, restrictions and the most valuable use of land when assessing values.
For a simple hypothetical example, land valued at $1.2 million over 600 square metres equates to $2,000 per square metre. If an independent valuation supported $1.8 million after changed planning controls, that would be $3,000 per square metre. Those figures illustrate the calculation; they are not a forecast or a typical rezoning uplift.
The increase depends on an achievable development after allowing for construction costs, contributions, finance and profit. Height, frontage, access, heritage, flooding and site assembly can limit the outcome. Doubling a floor-space allowance does not automatically double land value.
The NSW Low and Mid-Rise Housing Policy increases development potential on qualifying residential land within 800 metres walking distance of nominated centres and stations, subject to exclusions. Check the actual controls and obtain a planning feasibility assessment. A strategic plan or favourable zoning label is not development consent.
For strata apartments, the land value relates to the whole site and is apportioned by unit entitlement for statutory valuation purposes. It is not the market price of your apartment. An individual owner cannot assume that additional development potential can be used independently of the other owners or the applicable legal process.
A case on development limits
In Pertama Development Pty Ltd v North Sydney Council [2025] NSWLEC 1036, the applicant proposed an eight-apartment development in Neutral Bay. The site was zoned R4 High Density Residential, but the proposed design still needed to satisfy the planning framework applicable to that application.
The NSW Land and Environment Court refused the application. It rejected the requested height variation and identified problems with the response to the site’s landform, privacy impacts and the bulky presentation beside lower-density housing.
For investors, the lesson is to investigate what can realistically be approved before paying a development premium. The decision concerns a particular proposal; it does not establish a universal limit on similarly zoned sites or quantify an investment loss.
Recent tax changes affect the return you keep
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received assent on 26 June 2026. From 1 July 2027, for Australian resident individuals and trusts, it replaces the 50% CGT discount on future gains with inflation indexation. It also introduces a minimum 30% tax on relevant realised capital gains of resident individuals. Transitional rules address earlier gains, and exceptions include qualifying new housing.
The Act also limits negative gearing from 1 July 2027, as Treasury explains. Losses on established homes acquired after 7:30 pm AEST on 12 May 2026 generally cannot offset wages; they are quarantined under the new rules. Earlier acquisitions and qualifying new builds receive different treatment. Model the purchase using the rules applicable to your acquisition date and ownership structure.
Further tax reform legislation was introduced on 14 October 2026 and is not yet law. Obtain current tax advice on transitional valuations and eligibility before committing. Separately, rising assessed land values may increase NSW land tax, which generally uses three-year average land values, subject to exemptions and ownership rules. A paper uplift can therefore bring higher holding costs.
Rising interest rates can overwhelm a growth strategy
On 29 September 2026, the RBA increased the cash rate target by 0.25 percentage points to 4.60%. Your mortgage rate is set by your lender and may differ substantially. Check actual repayments and what happens when a fixed term expires.
As an illustration, a one-percentage-point increase on an unchanged $600,000 interest-only loan adds $6,000 a year, or $500 a month, before tax. Allow for higher rates, vacancies and repairs together. There is no reliable rule that each rate increase produces a fixed percentage fall in property prices, or that prices recover within a set cycle.
Red-brick apartments and the temptation to chase yield
A one- or two-bedroom red-brick apartment may appeal because of its location, purchase price and rent. However, the building’s appearance does not establish its financial or structural health. An older block without lifts or a pool can still need expensive roof, plumbing, balcony or waterproofing work.
Gross rental yield is annual rent divided by purchase price, multiplied by 100. It excludes strata levies, rates, management fees, maintenance and vacancies. Calculate the return after operating costs, then examine finance and tax separately. A higher advertised yield can disappear once foreseeable expenses are included.
Christine’s experience with special levies
I dealt with a client who thought he was getting a 5.5% rental yield. He was looking at the rent and the purchase price, and the numbers looked attractive. Once we allowed for the special levies, the return came back to 3.21%. That changed the picture considerably. This is why I want clients to understand what is happening in the strata records before relying on the headline figure.
The distinction matters: special levies reduce the return after expenses, not the gross yield calculation itself. The 3.21% figure should not be treated as a complete return after all expenses, finance and tax.
Get a thorough strata inspection before buying
The NSW Government’s strata buying guide recommends a strata search report and explains the separate role of a building inspection. These serve different purposes: records reveal financial and management issues, while a physical inspection assesses the property’s condition.
Ask the strata inspector to examine meeting minutes, insurance, litigation, levy arrears, approved or proposed special levies, and quotes for major repairs. Compare the capital works fund balance with the 10-year capital works plan. A low quarterly levy may reflect underfunding. Ask what records were unavailable and obtain answers to significant gaps before deciding.
If a special levy has already been approved or discussed, ask your lawyer to check the sale contract and payment arrangements. Do not assume the seller pays every instalment merely because the repair problem arose before you bought. Establish the amount, due dates and responsibility in writing, and allow for further works that have not yet been priced.
Turn research into a practical purchase decision
Review a current section 10.7 planning certificate, the title and any restrictions. Compare recent genuinely similar sales, obtain a realistic rental appraisal and prepare a budget that includes purchase costs and reserves. Test whether you could hold the property if prices remained flat and expenses rose.
CM Lawyers’ conveyancing team can review the contract, planning information and strata material, and identify issues requiring specialist advice. Understanding those documents before signing helps you assess both the growth opportunity and the financial commitments that come with it.
Key resources
- ABS — Population growth to March 2026: NSW population and annual growth, released 17 September 2026.
- NSW Valuer General — How land is valued: zoning, permitted uses and valuation factors.
- NSW Planning — Low and Mid-Rise Housing Policy provisions and section 10.7 planning certificates: development controls and property constraints.
- Pertama Development Pty Ltd v North Sydney Council [2025] NSWLEC 1036: official judgment concerning a refused residential development proposal.
- Treasury — 2026–27 tax changes, the enacted first reform Act and 14 October implementation Bill announcement.
- Revenue NSW — How land tax is calculated: land values, averaging and ownership rules.
- RBA — Monetary policy decision, 29 September 2026: cash rate increase to 4.60%.
- NSW Government — Buying a strata property and managing strata finances: inspections, levies and capital works.
