Investors Pivot to Commercial as Residential Tax Rules Change

Wave Money's new small-ticket commercial product is the latest sign investors are redirecting capital as negative gearing reform reshapes demand.

The landscape for Australian property investors has shifted materially since the federal Budget, and the mortgage market is beginning to reflect it. The latest indicator is a specialist non-bank lender launching a small-ticket commercial product specifically designed to help brokers identify opportunities within their existing residential investor client base — a direct response to the pivot taking place across the property investment sector.

Wave Money, a broker-exclusive non-bank lender focused on borrowers whose circumstances fall outside standard lending criteria, has entered the commercial lending space with the launch of its Small Ticket Commercial product. The product covers metropolitan commercial properties for both owner-occupied and investment purchases, with loan amounts up to $1.3 million, lending of up to 80% LVR, and terms of up to 30 years. Assessment options span Full Doc, Alt Doc, and Lease Doc, with support for individuals, non-trading companies, and trusts.

"Many of the best commercial opportunities aren't coming from new clients, they're already sitting within a broker's existing database," said John Flavell, Wave Money founder and managing director.

The timing is deliberate. Brokers are reporting a marked shift in investor appetite towards commercial property following changes to negative gearing rules that now limit the benefit to new-build residential dwellings purchased after Budget night. For investors who built their strategies around established residential property — now excluded from the negative gearing concession — commercial real estate has become an increasingly relevant alternative.

What the Data Shows About the Residential Investor Retreat

The pivot is backed by hard numbers. Investor home loan lodgements are down 35% by value and 31% by number since early February — the steepest decline of any borrower category tracked across the broker channel. The most telling figure is the gap between property types: lodgements for new-build investment properties, which remain eligible for negative gearing, are down a comparatively modest 15% since February. Lodgements for established properties — now excluded from the concession — have collapsed 40%.

That 25-percentage-point gap captures the mechanism precisely. Investors are not simply retreating from property; they are recalibrating which type of property makes financial sense. For a growing number, the answer involves redirecting capital away from established residential dwellings and toward assets where the tax treatment still stacks up — including commercial property.

First home buyers have not been spared, with lodgements down 23% by number and 19% by value since February. Owner-occupier upgraders have proven more resilient at a 14% fall by number, suggesting existing homeowners with equity are somewhat better insulated from the dual pressures of tighter borrowing capacity and shifting tax settings.

The consequences of reduced investment activity are already rippling through the rental market. Nationally, rents are rising at around 6% annually, outpacing both inflation at 5.4% and wage growth at 3.6%. In cities including Perth, Hobart, and Darwin, the annual increase is running closer to 8–10%. New home construction has hit 12-year lows, and it is estimated that tax reforms will result in around 35,000 fewer homes being built each year. When investors exit established residential property without a matching increase in supply from other sources, tenants bear the cost of that shortfall.

How Wave Money's Product Works — and Who It's For

Wave Money's Small Ticket Commercial offering is designed to reduce the complexity that has historically kept many residential-focused investors and their brokers away from commercial lending.

The 30-year loan term is a deliberate structural choice. Standard commercial lending typically operates on shorter terms, increasing monthly repayments and creating cash flow pressure for borrowers. Flavell said the extended term was designed to give borrowers more breathing room than typical commercial lending arrangements allow.

"By offering loan terms of up to 30 years, eligible borrowers can structure repayments over the longer term, improving cash flow and providing the confidence of a genuine 'set and forget' lending solution," he said.

The 80% LVR is also notable by commercial lending standards. Flavell said this level would allow borrowers to "leverage their capital more effectively, preserving cash for working capital, business growth or future investment opportunities."

Rather than expecting brokers to become commercial lending specialists, Wave Money has built its model around direct collaboration — scenarios are workshopped alongside broker relationship managers and credit decision-makers. The lender sees particular relevance for business owners looking to purchase premises they currently lease, as well as residential investors considering diversification into commercial assets.

What This Means for Investors Reviewing Their Position

The combination of falling residential investor applications, rising rents, and new commercial lending products entering the market paints a picture of a sector in active transition. Investors are not simply sitting on the sidelines — they are recalibrating, looking for where the tax treatment still works and where new lending structures make the numbers viable.

If you are an investor currently reviewing your strategy, our investor home loans hub covers current investment lending products including options for new-build residential where negative gearing remains available. For investors considering whether a commercial property purchase might suit their circumstances, speaking with a broker who can work through the scenario directly with a lender is likely to be more productive than using standard residential comparison tools.

For those looking to refinance existing investment loans as part of a portfolio review, our refinance savings calculator can model potential savings from switching to a more competitive rate — a useful starting point before committing to any new asset purchase.

The next significant catalyst for the investment lending market is the RBA's August 11 cash rate decision. A further rate rise would add to borrowing costs already squeezing investors and first home buyers alike, and could extend the application slowdown that has characterised the first half of 2026. Getting clarity on your financing position before that date is worth doing regardless of which way rates move.

Australian Broker reports on the Wave Money Small Ticket Commercial product launch.