Investor lending for new homes hits record high as broader mortgage market plunges - realestate.com.au

Recent analysis indicates that government tax reforms may be playing a significant role in enhancing the supply of new housing, as evidenced by a notable increase in investor loans for newly constructed homes. According to data from the Australian Bureau of Statistics (ABS), there were 10,923 investor loans for new homes in the June quarter, marking a remarkable 21.7 percent increase compared to the same period last year.

While loans for existing homes still represent a larger portion of overall investment lending, they have experienced a decline of 14.8 percent since the March quarter. This downturn in total investor lending reflects the sharpest quarterly decrease since March 2020, translating to approximately 7,000 fewer loans compared to the first quarter of 2023.

Investor loans for new homes now account for 20.8 percent of all investment loans recorded by the ABS, with a significant majority—four out of five—of these loans being directed toward construction rather than the purchase of existing properties.

Peter Drennan, head of research at Primara Research, noted that the demand from investors is one of the few areas witnessing growth amidst a broader decline in mortgage lending. “Total new housing lending fell 5.4 percent in the June quarter to 134,225, marking the second consecutive quarterly decline,” Drennan explained. “When excluding investor loans for new homes, the remaining market saw a decline of 6.2 percent. This category is one of the only ones still experiencing growth, even in the same quarter that saw the Reserve Bank of Australia implement its third rate hike this year,” he added.

The increase in investor loans for new homes began around the middle of last year and suggests that the government's tax reforms are effectively encouraging the construction of new housing. In a joint statement released during the Budget announcement, Prime Minister Anthony Albanese, Treasurer Jim Chalmers, and Housing Minister Clare O'Neil emphasized the importance of building more homes to tackle Australia’s housing challenges. “Building more homes is the main game when it comes to addressing Australia’s housing challenge. That's why new builds are exempt from the tax changes, to steer investment toward increasing supply,” the statement read.

Drennan, who conducted the research on behalf of HomeLoanRates.com.au, pointed out that the surge in investment in new homes aligns with tax reforms and lending modifications that are designed to minimize financial risk. “The timing coincides with two policy changes that both favor new builds,” he stated. “Existing properties purchased now are subject to lending limitations and will lose negative gearing benefits starting mid-2027. Investor lending has shifted towards new supply within two quarters following the implementation of both changes,” he noted, referring to the notable increase observed over the past six months.