Australia’s property market downturn will drag on until late 2027 as new home loans dropped by a record 15% in the September quarter, driven by a sharp retreat among property investors.
Official lending figures released on Wednesday by the Australian Bureau of Statistics reveal that the total value of new housing loans settled in the September quarter fell to $81.2 billion, marking a $14.9 billion or 16% drop compared to the June quarter in seasonally adjusted terms.
The decline represents the third consecutive quarterly drop in new loan commitments and the largest quarterly fall since the bureau began recording the series in 2002. Analysis of the data shows this pattern of three successive quarterly falls has coincided with every national housing downturn since 2008, with property prices typically bottoming out nine to 21 months afterward.
The contraction was led by an unprecedented exit by property investors facing the combined pressure of five Reserve Bank interest rate hikes and federal tax overhauls. The number of new investor loans dropped by 30.6% in the September quarter, down more than 15,000 loans to 35,301, while the total value of new investor mortgages fell 32.3% to $11.8 billion.
The steep fall follows the federal budget, where the combination of capital gains tax changes, interest rate rises, a time of rising unemployment, and falling real wages sent new housing loans tumbling.
Property Council chief executive Mike Zorbas warned that the changes were undermining investment in new housing and asked who the government thinks will finance new home construction and the rental homes Australians need, noting that investors account for about half of buyers in new apartment projects.
Valuations group Herron Todd White observed that tax reform and five interest rate hikes had decimated confidence in the property market.
Lending activity to owner-occupiers proved more resilient but still trended downward. Loans to established owner-occupiers fell 5.3% over the quarter, while first-home buyer lending declined 8.6% following a 4.4% decline in the previous quarter, leaving the number of loans to first-home buyers 12.3% lower than a year earlier.
Prime Minister Anthony Albanese said the balance is shifting toward first home buyers, while Workplace Relations Minister Amanda Rishworth described the figures as good news.
We’ve had a housing market geared towards investors for a generation. And where did it get us? Plummeting home ownership, out-of-control house price increases and a generation losing hope.
Clare O’Neil, Housing Minister
O’Neil said these numbers show the balance is shifting back towards Australians who are buying a home to live in, and especially to first home buyers.
Nationals MP Bridget McKenzie accused the government of betraying the great Australian dream of home ownership.
Major lending institutions have adjusted their outlooks in response to the lending contraction and interest rate pressures. The Commonwealth Bank of Australia now forecasts a peak-to-trough fall in national home prices of about 14%, expecting the market to find its floor in mid- to late-2027. ANZ has projected a similar cumulative decline of 7% to 14% and expects prices to stabilise in 2028 as the Reserve Bank begins easing rates.
Meanwhile, financial stress metrics are climbing. Commonwealth Bank reported that home loan arrears of 90 days or more increased by seven basis points to reach a 14-year high of 0.8% in the September quarter.
