Fresh Australian Bureau of Statistics data shows loans to investors fell by a record 30.6 per cent over the three months to September, with the federal government's budget overhaul of negative gearing and capital gains tax blamed for the fall. The drop is concentrated among investors buying existing homes.
Nationally, investor loans over the past 12 months have fallen by 38.6 per cent. The impact is most stark in New South Wales, where loans for existing dwellings collapsed by almost 50 per cent. Victoria saw a 27 per cent drop, Queensland 40 per cent, and Western Australia 38.1 per cent.
The slump follows the May budget, in which Treasurer Jim Chalmers outlined plans to limit negative gearing (the ability to offset rental property losses against income) to new builds only from July next year. The 50 per cent capital gains tax concession will also revert to an inflation-adjusted basis on the same date.
Housing Minister Clare O'Neil said the figures showed a clear shift away from investors towards people wanting to buy their own home. 'We've had a housing market geared towards investors for a generation, and where did it get us? Plummeting home ownership, out-of-control house price increases, and a generation losing hope,' she said. Liberal housing spokesman Andrew Bragg said the government's tax policies were hurting the property market and homeowners. 'No one wins from the new taxes, not first homeowners, not owners, not renters and not investors. Time for them to be repealed,' he said.
JP Morgan economist Tom Ryan noted that the drop in lending to owner-occupiers was in line with other falls during periods when the Reserve Bank was tightening monetary policy, while the investor decline was being exacerbated by the tax changes, which he warned are 'likely to remain a structural drag' for some time. HIA senior economist Maurice Tapang said investors are crucial to addressing housing undersupply and warned that policies increasing the cost or risk of investing 'do not resolve that shortage but rather make it worse'.
Overall new home loans fell by 15.5 per cent through the quarter, including an 8.6 per cent drop in loans to first home buyers. However, business loans for construction rose overall by 51.8 per cent over the year. Commonwealth Bank CEO Matt Comyn said the overall economy remained resilient due to low unemployment and strong infrastructure spending, but higher inflation and interest rates 'continue to place uneven pressure on household incomes and business activity'.
Analysis
Why This Matters
- The steep drop in investor activity could significantly worsen the rental crisis if it reduces the supply of rental properties.
- The figures provide the first major data point on the impact of the government's signature housing policy, making it a key political battleground ahead of the next election.
- The shift of investment towards new builds offers a potential avenue for increasing housing supply, but the immediate effect is a cooling of the broader market.
Background
The federal government announced in the May 2026 budget that it would restrict negative gearing to new properties and overhaul the capital gains tax discount. The changes take effect from July next year. The moves aim to rebalance the housing market away from investors towards owner-occupiers. The policy landscape has coincided with a tightening cycle by the Reserve Bank, with five rate hikes pressuring borrowing capacity. National property prices have now fallen for seven consecutive months.
Key Perspectives
Housing Minister Clare O'Neil: says the figures show a necessary rebalancing of the market away from investors and towards first home buyers, correcting a generation of investor-favoured policy.
Liberal housing spokesman Andrew Bragg: says the tax changes are hurting the entire property market, including first home buyers and renters, and should be repealed.
JP Morgan economist Tom Ryan: says the tax changes are making the investor decline worse than a standard interest rate cycle would cause and will remain a structural drag.
HIA senior economist Maurice Tapang: says investors are essential for rental supply and that current policies will worsen the housing shortage.
Commonwealth Bank CEO Matt Comyn: notes broader cost-of-living and interest rate pressures are unevenly affecting household incomes.
What to Watch
- Whether the drop in investor loans for existing homes triggers a further decline in already falling property prices.
- The impact on rental vacancy rates and rents through the summer moving season.
- Any further policy adjustments or concessions from the government if the construction sector fails to pick up the slack.
- The response from the Reserve Bank in its next rate decision, given the cooling effect of its own tightening and the fiscal policy.
Checked
12 claims in this story checked against 1 source: 12 supported.
Show each claim
- SupportedThe headline describes a record plunge in investor loans as the tax overhaul hits the property market.WA Today - Latest News: “Record plunge in investor loans as tax overhaul hits property market.”
- SupportedInvestor loans fell 30.6 per cent in the three months to September, a record fall.WA Today - Latest News: “Figures from the Australian Bureau of Statistics released this morning showed loans to investors dropped by 30.6 per cent in the three months to September.”
- SupportedThe federal government's negative gearing and capital gains tax overhaul was blamed for the fall in investor loans.WA Today - Latest News: “The federal government’s budget overhaul of negative gearing and capital gains tax has been blamed for the biggest fall in home loans taken out by investors on record”
- SupportedThe drop was concentrated among investors buying existing homes.WA Today - Latest News: “The drop, however, is concentrated among investors who purchase existing homes.”
- SupportedClare O’Neil said: “We've had a housing market geared towards investors for a generation, and where did it get us? Plummeting home ownership, out-of-control house price increases, and a generation losing hope.”WA Today - Latest News: ““We’ve had a housing market geared towards investors for a generation, and where did it get us? Plummeting home ownership, out-of-control house price increases, and a generation losing hope,” she told this masthead.”
- SupportedAndrew Bragg said: “No one wins from the new taxes, not first homeowners, not owners, not renters and not investors. Time for them to be repealed.”WA Today - Latest News: ““No one wins from the new taxes, not first homeowners, not owners, not renters and not investors. Time for them to be repealed,” he said.”
- SupportedTom Ryan warned the tax changes are “likely to remain a structural drag” for some time.WA Today - Latest News: “But the drop in investor lending was being exacerbated by the tax changes in this year’s budget, with Ryan warning that they are “likely to remain a structural drag” for some time.”
- SupportedMaurice Tapang said policies that increase the cost or risk of investing in housing “do not resolve that shortage but rather make it worse.”WA Today - Latest News: ““Policies that increase the cost or risk of investing in housing do not resolve that shortage but rather make it worse.””
- SupportedMatt Comyn said higher inflation and interest rates continue to place uneven pressure on household incomes and business activity.WA Today - Latest News: ““Higher inflation and interest rates continue to place uneven pressure on household incomes and business activity,” he said.”
- SupportedIn NSW, loans for existing dwellings fell by almost 50 per cent.WA Today - Latest News: “In NSW, investor loans for new builds fell by 18.4 per cent through the September quarter but for existing dwellings they collapsed by almost 50 per cent.”
- SupportedOverall new home loans fell by 15.5 per cent through the quarter.WA Today - Latest News: “Overall new home loans fell by 15.5 per cent through the quarter to be 21.4 per cent down over the past year.”
- SupportedBusiness construction loans rose by 51.8 per cent over the year.WA Today - Latest News: “Building loans by businesses soared in value by 27.6 per cent in the quarter to be 51.8 per cent up over the past 12 months.”