New South Wales State Budget 2026-27: BtR reforms reinforce the direction of housing supply policy

Overview

The New South Wales (NSW) Government has waived the nine per cent foreign purchaser surcharge duty for eligible Build-to-Rent (BtR) and retirement developments effective from 1 July 2026.

The measure brings BtR more closely in line with other institutional asset classes in NSW, improving project feasibility and supporting the redeployment of capital into new housing supplying the state.

What’s changing

The NSW Budget introduces an exemption from foreign purchaser surcharge duty for:

• BtR and retirement developments with typically more than 50 dwellings.

The removal of this surcharge continues to strengthen NSW’s competitiveness in attracting global capital into its housing sector.

This builds on existing policy settings designed to support rental housing delivery, including ongoing land tax concessions aimed at improving project feasibility and supporting large‑scale institutional investment in the sector.

What this means for housing supply

Removing the foreign purchaser duty on eligible developments is expected to increase transaction activity in the sector, supporting the recycling of capital into new housing supply and generating additional transfer duty revenue for the state.

The introduction of the surcharge had constrained investment, contributing to slower transactions and deferred projects. Aligning BtR with other institutional asset classes is likely to improve investor confidence and support more consistent development activity over time.

For some developments, the removal of a nine per cent surcharge may be sufficient to move projects forward. This is particularly relevant for BtR, where returns are typically realised over the long-term.

As a result, the reform is likely to:

• Support conversion of projects from planning into delivery
• Help unlock projects that have stalled or been deferred
• Contribute to a more consistent pipeline of new rental housing supply
• Recycle equity into the production of more housing.

These outcomes are important in a market where increasing supply remains one of the most persistent challenges.

What this signals to investors

The reform sends a clear signal to institutional investors that their capital is valued, highlighting that NSW open for business attracting capital to build more houses for the state, where decisions are increasingly shaped by:

• Policy certainty
• Tax efficiency
• Expected returns over time.

The measure also reflects a broader structural shift in housing policy, with governments focusing on directing investment into all types of new housing supply and supporting long-term rental models like BtR in addition to first home buyers, affordable housing and supporting the Housing Association sector.

It also positions BtR as a recognised and supported asset class. Historically, BtR has faced a range of structural challenges, including tax treatment, GST settings and foreign investment barriers. Incremental reforms such as this contribute to a gradual rebalancing of those settings.

Why NSW continues to lead the BtR market

The proposed reform is consistent with a broader pattern that has seen NSW emerge as the leading growth market for BtR in Australia.

BDO’s 2026 BtR report highlights how policy and tax settings are already influencing where capital is being deployed with NSW now leading forward pipeline growth.

NSWs continued focus on aligning tax, planning and investment settings is helping create the conditions institutional investors look for when delivering housing at scale.

How BDO can help

BDO’s real estate advisory team brings together specialists across valuation, feasibility, tax, policy and capital advisory, working with investors, developers and operators across Australia’s living sector.

Get in touch with our BtR specialists to discuss how these changes may impact your strategy.