A significant shift is occurring within Australia’s housing market, offering what one prominent economist describes as a “tiny step” towards greater equity after decades of problematic policy decisions. Recent data indicates a pronounced decline in property investor interest in established homes, with a corresponding pivot towards new builds. This trend is sparking cautious optimism regarding improved accessibility for first-time homebuyers and a potential rebalancing of the market.
According to the latest figures from the Australian Bureau of Statistics (ABS), new lending to property investors experienced a sharp drop of almost 9% in the three months leading up to June. Concurrently, the overall number of new home loans decreased by 5.4% during the June quarter. This downturn reflects a broader cooling in the mortgage market, with major banks reporting fewer applications in recent months. Factors contributing to this include the Reserve Bank of Australia’s (RBA) three official interest rate hikes and the federal budget’s investor tax changes, both of which have exerted downward pressure on property prices.
Mish Tan, the ABS’s head of finance statistics, confirmed that “lending fell across all borrower types this quarter and returned to similar levels to this time last year.” However, investor loans spearheaded this decline, contracting by 8.6% in the June quarter, following a 4.7% reduction in the previous period. While the number of investor loans was still 2.8% higher than the same time last year, the value of these loans saw a more substantial decrease of 10.2%. In contrast, loans to first home buyers also saw a modest dip of 2.9% over the three-month period, remaining relatively stable year-on-year.
Saul Eslake, a leading housing economist, suggests that the increased interest rates are likely deterring first home buyers. However, he views the significant reduction in lending to investors for existing properties as a positive development. “I don’t think it’s a cause for concern,” Eslake stated. “Whereas I would say the big fall in lending to investors for the purchase of established homes is actually something to be welcomed and celebrated. Because it means that prospective first home buyers are facing less competition from investors motivated by tax breaks for the housing we’ve already got.”
Indeed, the data reveals a notable divergence: loans to investors for established properties fell by a considerable 14.8%, while loans to investors for purchasing new builds surged by 4.4% to reach a record high. This shift is likely a direct consequence of the government’s budget carve-out, which incentivizes investor lending for the construction of new housing. Eslake emphasizes the importance of this trend, noting that increased investment in new construction directly boosts rental supply, thereby mitigating the competition between renters and investors for the existing housing stock.
Eslake characterized these statistical changes as a “tiny step” in the right direction for fostering a more equitable housing market in Australia. He acknowledged that while it’s a small movement, it represents a crucial departure from decades of policies that have inadvertently exacerbated housing affordability issues. “A tiny step. But at least it is in that direction, whereas we’ve been taking tens of thousands of steps in the wrong direction for the last thirty years,” he remarked.
Maiy Azize, the national spokesperson for Everybody’s Home, echoed this sentiment, highlighting that the figures demonstrate the effectiveness of the government’s tax reforms in “beginning to rebalance the market.” Azize particularly praised the encouraging trend of investors withdrawing from existing homes while simultaneously increasing their investment in new housing. This dynamic, she explained, directly reduces competition for first-time buyers seeking to purchase a home. Furthermore, Azize challenged the notion that immigration is the primary driver of housing prices, asserting that when governments implement policies that curb investor incentives, housing costs naturally become more accessible. “Housing becoming more affordable is a good thing, especially for people trying to buy their first home,” she concluded.
