New home loans suffer largest quarterly fall on record as investors exit

• New home loans have posted the steepest quarterly decline on record, led by a dramatic drop in investors applying for credit.
• Data from the ABS showed new investor loans over the September quarter dropped by more than 30 per cent.
• Dr Mish Tan of the ABS said the data suggests tax changes and falling house prices were likely the main drivers.

The value of new home loans in Australia has suffered the steepest quarterly fall on record, led by investors following the introduction of tax changes, including the scrapping of negative gearing.

New data from the Australian Bureau of Statistics (ABS), showed that the value of new home loans fell 15.5 per cent to $81 billion this quarter, the lowest level since records began in 2002.

The number of new home loans — which does not account for value — also dropped 15.0 per cent to 111,878 in the same period.

Investors were the key category in decline, with new home loans for investors dropping 30.6 per cent to 35,301, while the value of those loans fell 32.3 per cent to $25 billion.

Dr Mish Tan, ABS head of finance statistics, said the data revealed investors were shying away from property as an asset class.

“While lending activity fell across all borrower types in the September quarter, the decline was sharpest for investors,” Dr Tan said.

“Our data suggests that investor activity is being influenced by factors beyond increasing borrowing costs, including the potential impacts of tax changes and expectations of lower house prices.”

The latest reading shows the dramatic reversal in the number of new investor loans.

In the December quarter 2025, new investor loans sat at 24.9 per cent. Today’s reading has that same figure at -38.5 per cent.

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The number of loans for first home buyers also dropped, down 8.6 per cent in the quarter.

Lending to first home buyers is now 12.3 per cent lower than it was a year ago.

Despite this, home loans for first home buyers still account for more than one-third of owner-occupier commitments.

As Dr Tan alluded to, much has been made of the government’s introduction of changes to the tax system, including the scrapping of negative gearing.

Announced in the Federal Budget in May, negative gearing will be restricted to new builds only from July 1, 2027. Properties already structured around negative gearing prior to budget night will be exempt.

In simple terms, negative gearing allows an investor to run a property at a loss and deduct the difference from their taxable income.

Removing this increases the risk of investing in property, and in the current market of falling prices, makes property a less desirable option than it was a year ago.