First published 12 Nov 2026, 10:20am
Investor lending has fallen at a pace we have never seen before.
One of the arguments for the Federal Government’s housing changes was that reducing investor competition would make it easier for first home buyers to enter the market.
Ray White chief economist Nerida Conisbee says investor lending has fallen at a pace we have never seen while first home buyers are not filling the gap.
The latest lending data suggests this is not happening.
Instead, both groups are pulling back.
The number of new investor loans fell 30.6 per cent in the September quarter to 35,301.
This was the largest quarterly decline since the series began and almost double the previous record.
Australian new home loan commitments, investors and first home buyers. Source: Ray White
The total value of new housing lending fell 15.5 per cent, also a record.
First home buyers are not filling the gap.
The number of first homebuyer loans fell 8.6 per cent over the quarter to 26,415, the lowest since the end of 2022.
Since lending peaked in the December quarter last year, investor loans have fallen 43 per cent and first homebuyer loans 16 per cent.
The gap between the two groups is narrowing, but only because investor lending is falling more quickly.
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Ray White Group chief economist Nerida Conisbee.
The December peak followed the expansion of the 5 per cent deposit scheme in October 2025. Since then, five interest rate increases have taken the cash rate to 4.85 per cent, an 18-year high.
Higher borrowing costs have reduced purchasing power and made buying a home more difficult, regardless of whether the buyer is an investor or an owner occupier.
Despite this, the Federal Government is pointing to the latest figures as evidence that its housing policies are working.
On the same day the ABS reported the largest fall in home lending on record, the Government said the data released since the Budget showed it was having “real success” in getting more Australians into home ownership.
The evidence being used is the proportion of new loans going to owner occupiers, which has increased from 59 per cent before the Budget to 68 per cent.
Since lending peaked in the December quarter last year, investor loans have fallen 43 per cent and first homebuyer loans 16 per cent.
However, a rising share does not mean more people are buying homes.
It simply reflects the much sharper decline in investor lending.
First homebuyer loans are now around 3,700 lower than a year ago, while owner occupier lending fell 9.8 per cent in the September quarter.
There are fewer first home buyers taking out loans, not more. It is difficult to see this as evidence of a successful policy.
Of greater concern is what is happening to investment in new housing.
One of the objectives of restricting negative gearing to new homes from July 2027 was to encourage investors to move away from established properties and towards new construction. There has been some change in the composition of investor lending, with a greater proportion now going to new homes.
In the September quarter, contsruction loans to investors actually fell 11.8 per cent.
However, this is not translating into more new homes being financed.
Investor loans for construction and newly built homes have remained broadly unchanged over the year at around 9,700 per quarter.
In the September quarter, construction loans to investors actually fell 11.8 per cent.
Meanwhile, investor loans for established homes have halved since December. Investors are clearly leaving the established housing market, but there is little evidence that they are shifting their investment into new housing.
There is also likely to be more weakness ahead.
The full impact of the Budget changes is yet to appear in the lending data.
The ban on new SMSF borrowing for residential property only took effect on 10 August, with purchases contracted before that date still able to proceed.
Rent for this two-bedroom, two-bathroom unit at 1/199 Eliza Lne, Wavell Heights is $600 a week
Unlike the negative gearing changes, the SMSF ban also applies to new homes.
This means we are likely to see further declines in investor lending in the December quarter, including lending for new construction.
This creates a significant problem for housing supply.
Developers typically need substantial pre-sales before they can secure finance to begin construction.
Investors have traditionally accounted for a large proportion of these sales, particularly for apartments. Industry estimates suggest SMSF investors alone have accounted for at least 30 per cent of apartment pre-sales.
With SMSF borrowing now banned, other investors retreating and higher interest rates making developments more difficult to finance, it is increasingly unclear who will fund new housing construction. Rising construction costs are adding further pressure.
This three-bedroom house at 134 Mount Nutt Rd is advertised at $600 a week
Dwelling investment is set to decline over the next 12 months
My earlier analysis found that rental yields would need to increase from around 3.95 per cent to 5.15 per cent to compensate investors for the Budget changes. Until returns improve, it is difficult to see investors returning in large numbers.
The latest lending figures show that reducing investor activity does not automatically lead to more first home buyers entering the market.
Nor does it necessarily mean more investment in new housing.
Australia needs substantially more homes.
At the moment, the policies designed to encourage new supply appear to be reducing the number of people willing to finance it.
Nerida Conisbee is the Ray White Group chief economist
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