Investor Loans Crash 30.6%, First Home Buyers Fall Too

This matters because the Federal Government's entire policy logic rested on a simple trade: if investors retreat, first homebuyers advance. That is not what the lending data shows. Both cohorts are pulling back. Higher borrowing costs cut purchasing power for everyone, regardless of whether the buyer is chasing rental yield or a place to live. The Government is instead pointing to the rising share of new loans going to owner-occupiers, up from 59 per cent before the Budget to 68 per cent, as evidence of "real success." But a rising share simply reflects investors leaving faster than owner-occupiers — it does not mean more people are buying homes. First homebuyer loans are around 3,700 lower than a year ago.

For borrowers watching this unfold, the practical read is blunt: fewer loans are being written across the board, and the group meant to benefit from investor withdrawal is shrinking in absolute terms. Treasurer Jim Chalmers told The Guardian the reforms "are all about helping more first home buyers into the housing market" and that benefits would "play out over years, not months." The data to date does not support that timeline.

Why the Supply Pipeline Is the Real Risk

The more consequential story sits inside the composition of investor lending. One stated objective of restricting negative gearing to new homes from July 2027 was to push investors toward new construction rather than established stock. There has been some shift — a greater proportion of investor lending now goes to new homes — but construction loans to investors actually fell 11.8 per cent in the September quarter. Investor loans for construction and newly built homes have stayed broadly flat over the year at around 9,700 per quarter, while investor loans for established homes have halved since December.

Investor loans for established homes have halved since December, yet investor lending into new construction has stayed flat near 9,700 loans a quarter — evidence that capital leaving the established market is not reappearing as new housing finance.

This is where the policy mechanics break down. Developers typically need substantial pre-sales locked in before they can secure construction finance. Industry estimates cited in the realestate.com.au analysis suggest SMSF investors alone have accounted for at least 30 per cent of apartment pre-sales. The ban on new SMSF borrowing for residential property took effect on 10 August — and unlike the negative gearing changes, it applies to new homes as well as established ones. Because purchases contracted before that date can still proceed, the full effect has not yet shown up in the lending figures. Conisbee's analysis flags further declines likely in the December quarter, including weaker lending for new construction specifically.

For developers and builders, this raises a genuinely uncomfortable question: with SMSF borrowing banned, other investors retreating, and higher rates making projects harder to finance, who funds the next wave of apartment supply?

Context: Rental Yields and the Investor Calculus

Conisbee's earlier modelling found rental yields would need to rise from around 3.95 per cent to 5.15 per cent to compensate investors for the Budget's tax changes. Until returns improve materially, there is little reason to expect investors to return in volume. This sits alongside the broader question of how property compares with other wealth stores over time — a question explored in APF's Property vs Gold — Which is the Better Wealth Store? guide, relevant as investors weigh whether residential property still earns its place in a portfolio against the tax and financing headwinds now in play.

The Guardian Australia's reporting adds a second strand of pressure: Commonwealth Bank's quarterly update showed borrowers 90 days or more behind on repayments rising to 0.8 per cent of total lending, up from 0.73 per cent — the highest since 2014. Morningstar analyst Nathan Zaia said the trend had "probably hadn't peaked," though S&P Global's Nico de Lange said it did not yet signal systemic stress for the banking sector. ABS head of finance statistics Mish Tan said the investor pullback "suggests that investor activity is being influenced by factors beyond increasing borrowing costs, including the potential impacts of tax changes and expectations of lower house prices."

What It Means for Buyers, Sellers and Investors

For first homebuyers, the headline owner-occupier share of 68 per cent may look encouraging, but the underlying loan count tells a different story — there are fewer first homebuyers in the market than a year ago, not more. Anyone relying on "less investor competition" as a reason to expect easier entry should treat that assumption with caution; the data so far does not support it. Buyers weighing their position should understand how lenders assess serviceability and deposit requirements, covered in APF's What is a Buyer's Agent? guide and the broader Australian Property Statistics reference.

For investors, the SMSF borrowing ban and the halving of established-home investor lending since December point to a market segment in retreat, not rotation. Those still considering leveraged residential purchases should review current macroprudential settings via APF's APRA Lending Restrictions and Macroprudential Policy Explained guide, and weigh borrowing capacity using tools such as those tracked by REAStats, which monitors lending and clearance trends across the capitals.

Policies designed to encourage new supply appear to be reducing the number of people willing to finance it. Further declines in investor lending, including for new construction, are likely in the December quarter as the SMSF ban's full effect lands. Those relying on the "bubble" narrative to call a bottom should read APF's Does Australia Have a Property Bubble? guide before drawing conclusions from a single quarter of data.