Investor lending after the budget

The ABS recorded the sharpest quarterly fall in new investor loans since 2022. PIPA Chair Cate Bakos told several outlets that the figures show only the first part of the change that followed the budget.

What the lending figures showed

Craig Francis reported in Australian Property Investor on the 14th of August 2026 that the number of new investor loans fell 8.6 per cent in the June quarter, according to the Australian Bureau of Statistics. It was the largest quarterly fall since September 2022. Annual growth in investor lending slowed from 19.4 per cent in March to 2.8 per cent. Investor loan numbers fell 15.5 per cent in New South Wales, 14.2 per cent in Victoria and 10.1 per cent in Queensland.

Average investor loan sizes rose in Queensland, South Australia and Western Australia, where the average reached a record $678,000. First home buyers did not take up the demand investors left behind: first home buyer loan numbers fell 2.9 per cent, following a 3.6 per cent fall in the previous quarter.

The policy change behind the data

As reported by Australian Broker, the budget removes negative gearing for established dwellings bought after the 12th of May 2026, with effect from the 1st of July 2027. Existing holdings are grandfathered, and newly built dwellings remain eligible.

Cate Bakos on the investor retreat

Cate Bakos, Chair of PIPA, told API that established property investors had effectively left the market since budget night, and estimated that perhaps 2 per cent remain active. She told Australian Broker that, apart from self-managed super fund purchasers before the 10th of August, her only recent investment client was an international buyer. That buyer would not have received negative gearing in any case.

Established property investors, outside of self-managed super funds for a very brief window, have pretty much left our market since the 12th of May.

Cate Bakos, Chair of PIPA, quoted in API, Australian Broker and news.com.au, August 2026

She attributed the retreat to borrowing capacity rather than confidence, citing clients whose capacity fell sharply once negative gearing could no longer offset holding costs. In her words to Australian Broker, “This isn’t about sentiment. It’s about maths.”

What the June quarter does not yet show

The June quarter runs to the 30th of June, so it covers only the first seven weeks after the budget. Ms Bakos noted that the full effect on lending volumes will not appear until later releases cover the months after June, so the fall of 8.6 per cent is a partial measure.

Herron Todd White chief economist Cameron Kusher added that the number of first home buyer loans fell for a second consecutive quarter while the value of those loans rose. Those still buying are borrowing more to do it, and fewer people are borrowing at all. Oxford Economics Australia lead economist Maree Kilroy pointed to factors that should limit more extreme price outcomes: a resilient labour market, population growth, limited new supply and the underlying housing shortage.

The effect on tenants

Ms Bakos told news.com.au that the pressure on tenants will intensify as investors leave and stop buying in the same volumes. The same article reported modelling of 180,000 rental listings by MCG Quantity Surveyors and Suburbtrends. It found that new dwellings rent for an average of $65 a week more than established ones, with the gap reaching $24,700 a year in parts of Sydney’s eastern suburbs. SQM Research put the national vacancy rate at 1.3 per cent in July, with five capital cities below 1 per cent.

Where established dwellings leave the rental pool and new stock replaces them, tenants may face higher rents and fewer options in the established inner and middle ring suburbs.

What an investor should establish now

The questions an investor needs answered depend on their position.

• An investor who already holds property should confirm with a tax adviser how the grandfathering provisions apply to each holding.
• For a purchase, the contract date and whether the dwelling is classed as new or established determine the tax treatment. Both should be confirmed before signing.
• For any purchase, the rent should be tested against the full holding costs without the deduction. Ms Bakos framed the question as arithmetic, and a cash flow model is the means of answering it.

Early responses to the PIPA Annual Investor Sentiment Survey, then in its twelfth year and due for release in September, pointed to investors redirecting capital to shares and superannuation. Investors reviewing a holding or a purchase can search for a Qualified Property Investment Adviser, and PIPA continues to press for property investment advice to be regulated.