Property investor exodus drives record quarterly fall in Australian home lending

[SYDNEY] New home loans in Australia fell by a record amount during the September quarter, driven by a sharp investor retreat amid higher borrowing costs and tax policy changes aimed at curbing demand.

Wednesday’s data from the Australian Bureau of Statistics (ABS) showed total new home loans fell 15.5 per cent by value in the September quarter to A$81.16 billion (US$55.6 billion), marking a third straight quarter of declines.

The quarterly drop of 15.5 per cent was the largest since data began being collected in late 2002; it was caused by a sharp fall in property investor lending, the ABS said.

Investors are facing higher borrowing costs following five interest rate increases by the central bank this year, taking rates to their highest level in 18 years.

They have also been affected by government policy changes that will end property investment tax breaks that had been blamed for inflating house prices in the country.

In May, the Australian government said the capital ⁠gains tax discount would be scrapped from July 2027. Negative gearing, which allows investment losses to be offset against taxable income, will also be banned on existing housing.

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Mish Tan, head of finance statistics at the ABS, said the data showed investor activity was being influenced by higher borrowing costs as well as “the potential impacts of tax changes and expectations of lower house prices.”

The number of loans dropped 15 per cent in the quarter, according to the ABS. Loans for owner-occupiers fell 5.3 per cent by value, while those for investment properties dropped a steeper 32.3 per cent.

Home prices have fallen for seven months, the biggest downturn in decades, according to Cotality, a property data firm.

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Australia’s major banks have also reported steep falls in home loan applications. On Wednesday, Commonwealth Bank of Australia said home loan applications were down 16 per cent for the September quarter from a year earlier. REUTERS