Sharpest home loan drop on record as property investors exit market

In the September quarter, there was a record drop in new home loans, with overall loan volumes falling 15 percent. Investor loans experienced a sharper 31 percent decline compared to the 5 percent drop for owner-occupiers. Housing Minister Clare O'Neil noted that homeowners fared better than investors in the data, which aligns with the goal of the tax changes.

The decline in loans and their total value was the sharpest ever recorded. Mish Tan, head of finance statistics at the Australian Bureau of Statistics, suggested that investors were being deterred by high interest rates, tax changes, and expectations of lower house prices. Housing conditions had weakened since the May budget, when the government announced plans to curb property investor tax breaks, and the decline has spread across major cities.

House prices have fallen 6.7 percent from their March peak, the steepest decline in 40 years, as reported by Cotality. The opposition and property groups attribute the figures to negative gearing and capital gains tax changes. Liberal housing spokesperson Andrew Bragg emphasized that fewer loans signal a loss of confidence in the market.

Treasurer Josh Frydenberg, however, attributed the fall to five rate hikes in the past year, now at their highest level since 2008. Reserve Bank Governor Michele Bullock highlighted that investor demand had fallen more significantly than in previous rate-hiking cycles, pointing to tax changes as the main factor. Treasury's analysis, which formed the basis for the government's policy, predicted a modest decline in house price growth.

While government officials and Treasury remained confident about the forecast, private assessments within the government acknowledged the fall was deeper than expected. The shift is seen as a return to a more balanced housing market, favoring first-time homebuyers and regular homeowners over investors.