The Budget structurally redirected investment toward new residential construction by restricting negative gearing to new builds only, which also reduces the appeal of going “direct” in property, increasing the relative appeal of listed players. Debt taken on to buy listed REITs (or any shares) remains tax deductible. These two important factors we think will have a bearing on relative performance across the property sector.
Mirvac (ASX: MGR): As one of Australia’s largest integrated residential developers, is a direct beneficiary of any demand shift toward newly constructed apartments and townhouses over established properties and the market reacted accordingly on Wednesday pushing the stock up ~4%, although it’s still well off its 2026 highs.
We bought back into MGR a touch too early in mid-March believing markets view of rising interest rates was “as bad as it gets” but a surging oil price after war broke out with Iran put this thesis on ice by a few months. However, the stocks forecast ~6% yield is attractive (unfranked) when combined with the budget ramifications – MM owns MGR in our Active Growth Portfolio and Active Income Portfolio.
Retail REITs: the Budget’s CGT reforms apply to all established asset classes — including listed REITs. Vicinity’s (ASX: VCT) shopping centre portfolio faces the dual headwind of a consumer under mortgage stress spending less in its centres, and a property investor universe that has just been told capital gains from established assets will be taxed more heavily from July 2027. The ~5.2% yield is solid, but the capital growth component of total return has just been structurally repriced lower.
- We believe Mirvac is in a better position than most ASX real-estate stocks to pull the right levers post-budget.
MM prefers Mirvac to Vicinity, around $1.70 and $2.50, respectively
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Mirvac Group (MGR) v Vicinity Group (VCX)
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Mirvac Group (MGR) v Vicinity Group (VCX)
