5000 property investors flee market after landlord tax change

Australia has already recorded an almost 5000 investor wipeout in the aftermath of the federal budget’s May budget changes to landlord tax benefits.

June quarter lending data released by the Australian Bureau of Statistics shows there was a 5.4 per cent decline in loans, accounting for a 7711 drop from the first three months of 2026 — in what could be a huge problem for state governments now facing the prospect of monster budget blackholes in lost stamp duty.

A shocking 4966 of the loan reduction was investor borrowers, with that category recording an 8.6 per cent reduction from the previous three months — and a more than $4bn reduction in the value of loans being issued to them.

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The ABS data also revealed a 2746 loan reduction from owner occupiers, marking a wholescale reduction in lending, despite loan numbers typically being heavily tapered by festive season holidays and limited property market activity in January and February.

The number of first-home buyer loans being issued dropped by 891 (2.9 per cent).

However, market entrants are spending more to get in — with their typical loan size increasing to almost $627,000 in June.

The ABS data for new loan commitments goes back to September 2019 and the only other times it has shown a decline in overall lending from March to June was in 2022 and 2023 when there were far more severe interest rate hikes than have been recorded this year, and in 2020 when the entire nation was put into a Covid lockdown that almost entirely shut off real estate sales for a period.

Oxford Economics Australia lead economist Maree Kilroy said NSW investor lending and Victoria had recorded investor loan size declines of 15.5 per cent and 14.2 per cent, to lead the nation down.

“The changes to negative gearing and capital gains tax have soured investor sentiment,” Ms Kilroy said.

“Following the Budget announcement, several banks are reporting 20 per cent declines in investor loan applications – largely consistent with the latest ABS data. We expect property turnover to fall by a fifth over the 2027 financial year.”

KPMG urban economist Terry Rawnsley said reductions in the numbers of investor loans had not come with reduced loan sizes with the national average investor loan still relatively stable at $708,000.

Mr Rawnsley noted that along with higher interest rates, the downshift reflected the “early impact of changes to negative gearing and capital gains tax concessions announced in the May budget”.

However, the economist noted there were increases in loan sizes for the cohort in Queensland, South Australia and Western Australia.

These were offset by reductions in other areas, with NSW and Victoria also recording reductions in typical loan sizes for owner occupiers — though the figure grew for owner occupiers in some other states.

“Although loan sizes eased in New South Wales, Queensland and South Australia over the quarter, first home buyers across the country continue to take on substantial levels of debt as high housing prices remain a barrier to home ownership,” Mr Rawnsley said.

The economist noted that th

Property Investor Professionals of Australia chair Cate Bakos has warned the ABS stats are a warning sign Australia’s renters will soon suffer.

“Established property investors – outside of self‑managed super funds for a very brief window – have pretty much left our market since May 12,” Ms Bakos said.

“Maybe two per cent still exist. Aside from self-managed super fund purchasers up to August 10, the only client I’ve had any investment activity with recently was an international buyer who wouldn’t have received negative gearing anyway.”

In May this year, the Anthony Albanese government announced major changes to investor tax benefits, with negative gearing now limited to new builds and arguably the most generous capital gains tax discounts also now only available for new additions to the nation’s housing supply.

It has already lead to significant reductions in auction clearance rates around the country, plunging below 50 per cent in the nation’s two biggest markets of Sydney and Melbourne across much of June and July.

Ms Kilroy noted that with total listings of homes for sale lifting around the nation, and the time it takes homes to sell also growing, there were signs fewer prospective buyers were active.

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