New home loans fall as housing demand weakens
Investor lending records its biggest decline since 2022
Australia’s housing lending market continued to lose momentum in the June quarter, with the latest Australian Bureau of Statistics (ABS) data showing a 5.4% decline in new home loans. The fall follows a 3.4% decline in the March quarter, highlighting continued weakness in borrowing activity.
The latest figures come as households and investors face a changing interest-rate environment, with the Reserve Bank of Australia increasing the cash rate for the third time in 2026. Changes to negative gearing and capital gains tax announced in the May federal budget are also adding to uncertainty around property investment.
Investor lending leads the decline
The biggest weakness came from investor lending, with the number of new investor loans falling 8.6% during the June quarter.
According to the ABS, this was the largest quarterly decline in investor loans since the September quarter of 2022.
Annual growth in investor lending also slowed sharply. Growth fell from 19.4% in the March quarter to just 2.8% in the June quarter, suggesting that the strong momentum seen in investor borrowing earlier in the year has faded.
The slowdown comes as higher borrowing costs and changes to the expected tax environment influence investment decisions across the property market.
Owner-occupier lending also declines
Owner-occupier borrowing was also weaker, although the decline was less severe than in the investor segment.
New owner-occupier loans fell 3.3% in the June quarter, following a 3.8% decline in the previous quarter.
This marks another period of declining borrowing activity from Australians purchasing homes for their own use, suggesting that higher interest rates are continuing to influence household decisions.
The ABS noted that lending conditions continued to change during the quarter, with the RBA raising interest rates and the federal government announcing changes to negative gearing and capital gains tax arrangements, scheduled to begin in July 2027.
What investors should watch next
The latest lending figures provide another sign that Australia's housing market is facing a period of softer demand.
With both investor and owner-occupier lending declining, the direction of interest rates will remain an important factor for the property market. A sustained period of weaker borrowing could also affect housing activity, construction and related sectors.
For investors, the key indicators to watch will be mortgage demand, interest rates, investor activity and housing prices. Any further slowdown in lending could signal that buyers are becoming increasingly cautious as borrowing conditions remain challenging.
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