Australia home lending posts record investor-driven fall in September quarter

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Australia home lending falls

Highlights

New home loans in Australia fell 15 per cent by number and 16 per cent by value from June to September, with investor loans plunging a record 31 per cent.
Nationwide house prices declined 6.7 per cent from their March peak, marking the fastest drop in 40 years, as auction clearance rates also fell.
Five rate hikes and tax changes reduced investor demand further than in previous cycles, shifting housing finance towards owner-occupiers despite an 8 per cent drop in first homebuyer lending.

September quarter lending slump

As reported by ABC News, citing the Australian Bureau of Statistics, the total number of new home loans falls 15 per cent from June to September, while the total value of those loans drops 16 per cent. Investor loans fall 31 per cent over the quarter, compared with a 5 per cent decline for owner-occupiers, with both the overall fall and the investor decline setting official records.

Mish Tan, head of finance statistics at the bureau, says the figures suggest investors are being discouraged not only by high borrowing costs but also by tax changes and expectations of lower house prices. Housing market conditions are already weak before the May budget, but deteriorate more sharply afterward and spread beyond Melbourne and Sydney to other capital cities.

Nationwide house prices have fallen 6.7 per cent from their March peak, the fastest decline in the past 40 years according to property data company Cotality. Auction clearance rates also fall, adding to evidence of softer market conditions through the middle of the year.

Tax debate and market impact

Housing Minister Clare O'Neil says the data show the government's tax changes are shifting the market away from investors and toward people buying homes to live in. She says weaker volumes are expected while prices soften, but argues the figures indicate a rebalancing in favour of owner-occupiers, particularly first home buyers.

The opposition and property groups blame the fall on changes to negative gearing and capital gains tax settings. Liberal housing spokesperson Andrew Bragg says confidence in the market has collapsed, while Master Builders Australia chief executive Denita Wawn says the figures support the sector's warnings that reduced housing investment comes at a time of strained supply.

Economists say five rate hikes this year, which take rates to their highest level since 2008, also contribute to the downturn. Reserve Bank governor Michele Bullock says investor demand has fallen much further than in previous rate-hiking cycles, indicating the tax changes are having an additional effect beyond higher rates.

First homebuyers fare worse than other owner-occupiers, with lending down 8 per cent compared with a 3.5 per cent fall for non-first homebuyers, but they still perform better than investors. The divergence underscores how policy and borrowing costs are reshaping demand across Australia's housing finance market.

We recently reported on Pakistan’s priority-sector lending push, as the government urged banks to expand housing, farm, and SME credit.

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