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‘Broken confidence’ drives unprecedented investor exodus
Investors are fleeing the property market at record rates, with taxation changes decimating buyer confidence and raising concerns about future housing supply.
A sharp fall in investor lending has sparked concerns from industry bodies regarding the future of the nation’s housing supply.
Investor lending across the country nosedived in the September quarter, with the latest Australian Bureau of Statistics (ABS) lending data reporting the largest drop on record.
The ABS found that new investor loans fell 30.6 per cent over the quarter, down more than 15,000 loans to 35,301, marking the third straight quarter of decline.
The drop saw investors account for just 31.6 per cent of new loans, the lowest share since September 2021.
Herron Todd White chief economist Cameron Kusher noted that the data was the first full quarter to include the impact of the budget announcement, and the first to include the self-managed super fund (SMSF) limited recourse borrowing ban.
He said the culmination of the tax reforms, along with five interest rate hikes over the year, had broken buyer confidence.
“It’s hard to see how the tax changes, along with five interest rate increases this year, have done anything but decimate confidence in the property market.”
Kusher said that an investor retreat of this scale was unprecedented in the market.
“With residential property prices and sales volumes trending down, it’s little surprise to see that mortgage finance commitments have continued to reduce over the September 2026 quarter.”
According to the data, the decline in lending activity affected all borrower types, but investors were hit hardest overall.
He said that, outside investors, first-home buyers were the most affected demographic, whom the reforms were designed to help in the long run.
“Even first home buyers, who these changes were meant to help, are hesitant to purchase right now.”
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Despite reported declines among first home buyers, housing minister Claire O’Neil insisted the overall share of first home buyers and owner-occupiers had increased and that the tax changes had helped more home buyers enter the market, attracting criticism from the opposition.
Shadow infrastructure minister Bridget McKenzie labelled the government’s housing policies as “economically incompetent.”
“When Clare talks about first home buyers, I’m thinking about those first home buyers who took her up on the offer of the 5 per cent deposit scheme, who are now in negative equity,” McKenzie said.
Where will new supply come from?
In response to the data, Property Council chief executive Mike Zorbas raised concerns about the supply of new homes if investor activity continued to decline.
“Who does the Albanese government think is going to finance new home construction, including the rental homes Australians need?” Zorbas said.
“Investors account for around half of buyers in new apartment projects. Their off-the-plan purchases help developers secure the construction finance needed to get homes built.”
He said that without investor financing, more projects would struggle to secure funding.
Master Builders Australia chief economist Shane Garrett said the sharp decline in housing finance pointed to a weaker pipeline for approving, commencing and completing future projects.
“While lending to investors increased slightly when construction and purchase loans for new builds are combined, that modest rise was overwhelmed by the broader reduction in housing finance.”
“Without policy settings that encourage investment and reduce the cost of delivering new projects, these figures will make it harder to improve affordability.”
Zorbas said entire developments could be put at risk, including the homes first homebuyers and owner-occupiers would want to buy.
“Is the government planning to step in and underwrite projects that cannot secure finance? A foolish political deal has already seen SMSF investors in rental homes get the boot, and now the rest of the market is suffering.”
“The government must fix its CGT, negative gearing and trust tax changes to support investment in new housing,” Zorbas said.
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