May 19, 2026

2026 Budget Outcomes for New Housing and KDR Investment

New Custom Homes and the Knock Down Rebuild Market: Opportunities Following the 2026 Federal Budget

The 2026 Federal Budget has introduced a strong national focus on increasing Australia’s housing supply. While not every measure will positively affect every Australian, one segment of the market appears particularly well-positioned moving forward: custom new homes and knock down rebuilds.

The Budget reinforces a long-term shift toward encouraging the construction of new housing rather than relying on ageing established homes. For families, owner occupiers and investors considering a knock down rebuild (KDR), that could create significant opportunities over the coming years.

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Why Knock Down Rebuilds Are Gaining Momentum

A knock down rebuild offers something many buyers are struggling to find in today’s market: the ability to live in a highly desirable established suburb while enjoying the benefits of a completely new custom home.

Rather than compromising on location or taking on the uncertainty of major renovations, more Australians are choosing to rebuild on land they already own or purchase older properties specifically for redevelopment.

The Federal Budget looks to support this trend.

Several proposed housing and taxation reforms are designed to encourage the creation of new housing supply, with newly constructed homes expected to remain more favourable under future investor settings than older established properties.

While these measures still require legislation and may evolve, the overall policy direction is increasingly focused on:

Building more homes
Encouraging new construction
Supporting housing supply growth
Increasing residential development activity

For the custom home and KDR market, that creates a positive long-term outlook.

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Building New Is Becoming More Strategically Attractive

For years, many homeowners have faced the same question: “Do we renovate, move, or rebuild?”

Increasingly, rebuilding is becoming the preferred option.

A custom knock down rebuild allows homeowners to:

Stay in the suburb they already love
Design a home specifically for their family’s lifestyle
Improve energy efficiency and sustainability
Reduce long-term maintenance costs
Maximise the value of their land
Create a modern home suited for future living

The Budget’s broader emphasis on new housing supply only strengthens the long-term appeal of building new over renovating ageing housing stock.

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The Budget Is Supporting New Housing Supply

The Government has reinforced its national housing target of 1.2 million new homes by 2029 while continuing support for broader housing initiatives including:

Housing Australia Future Fund
Help to Buy
Build-to-Rent incentives
Planning and approval reform
Modular and prefabricated housing support

In addition, the Budget includes a proposed $2 billion Local Infrastructure Fund designed to help unlock approximately 65,000 new homes nationally over the next decade through investment in roads, utilities, sewerage and community infrastructure.

This continued focus sends a clear message: increasing housing construction remains a national economic priority.

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Why This Matters for Custom Home Buyers

For custom home clients, the shift toward supporting new construction creates confidence in the long-term strength of the sector.

Demand for modern homes remains high because buyers increasingly value:

Functional family-focused layouts
Energy-efficient design
Open-plan living
Premium finishes
Lower ongoing maintenance
Stronger long-term resale appeal

Older homes in established suburbs often struggle to deliver these outcomes without substantial renovation costs.

A knock down rebuild provides the opportunity to combine premium location with modern custom design without sacrificing either.

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Investors Are Also Watching the New Build Market

The Budget’s proposed negative gearing and Capital Gains Tax changes are expected to favour newly built housing over established property moving forward.

As a result, newly constructed homes including custom rebuild projects may become increasingly attractive to investors seeking:

Modern tenant appeal
Better depreciation outcomes
Lower maintenance exposure
Improved energy efficiency
Alignment with future government housing policy

Importantly, all taxation and investment decisions should be discussed with an independent financial adviser or accountant.

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A Growing Opportunity for Established Suburbs

One of the biggest long-term opportunities for the KDR market is the growing demand for modern homes within established suburbs.

Many buyers no longer want to choose between:

Living close to schools, lifestyle precincts, and family networks; and
Living in a brand-new home.

Knock down rebuild projects solve that problem.

As land availability becomes more constrained in premium locations, rebuilding existing properties is expected to become an increasingly important part of Australia’s future housing supply.

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NUVO Homes Is Ready to Build the Future

At NUVO Homes, custom homes and knock down rebuilds are at the heart of what we do.

We understand the unique challenges of rebuilding in established suburbs; from design and planning through to construction and delivery and we work closely with our clients to create homes that are tailored, practical and built for modern living.

While the broader market continues to evolve, one thing remains clear: the future of housing is increasingly focused on creating new, high-quality homes.

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WRITTEN BY

Cody Goodwin

Director, NUVO Homes Residential P/L

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Information Sources

This article is based on publicly available information and summaries relating to the 2026 Australian Federal Budget housing announcements and associated reporting.