Property investors retreat as tax changes and rates bite
Australian property investors are pulling back from the housing market as higher borrowing costs and changes to investment tax settings combine to reduce demand, raising concerns about the longer-term impact on rental supply.
New housing loan commitments to investors are now 27 per cent below their November 2025 peak, according to Reserve Bank data cited in the report. The decline is larger than during most credit-tightening periods since 1990.
The retreat comes as interest rates place additional pressure on borrowers. The Reserve Bank has lifted the cash rate to 4.85 per cent, an 18-year high, while the average variable mortgage rate is expected to reach 6.75 per cent.
At that level, mortgage repayments would consume 37.4 per cent of a typical household’s income, approaching the record 37.5 per cent reached in December 1989, according to RBA figures.
Tax changes add to investor uncertainty
The slowdown is not being attributed solely to interest rates.
HSBC chief economist Paul Bloxham said the property downturn reflected both the usual cyclical effect of higher rates and a structural change to the tax system that could result in less investor interest over time.
The report said the government was winding back negative gearing and capital gains tax discounts as part of measures announced in the May federal budget.
Melbourne investor Ben Nobelius, who owns several properties and works as a land surveyor, said higher holding costs and changes to tax settings had altered the investment equation. He indicated that he had no plans to buy into the residential market again.
Commonwealth Bank economists expect the housing market to experience its largest downturn on record, with prices falling in every capital city and declines of as much as 16 per cent in Sydney.
Reserve Bank governor Michele Bullock has also signalled that the reduction in investor loans has gone beyond the pattern seen in previous interest-rate tightening cycles, according to the report.
Industry warns of implications for housing supply
Property industry representatives are concerned that a sustained investor retreat could affect rental housing availability.
Ray White chief executive of performance and value Thomas McGlynn said investors would typically be buying during a market downturn, but that group was noticeably absent this time. He said investors had not necessarily lost confidence in property itself, but were concerned about the broader investment environment.
Property Investors Council of Australia chairman Tim Graham said the industry wanted the government to reconsider reforms that discourage investors, pointing to Australia’s existing structural housing shortage.
The latest rate increase is expected to further lift ownership costs at a time when tax reform and borrowing conditions remain uncertain.
Treasury secretary Jenny Wilkinson has said the tax measures are expected to have a modest impact on house prices and rents over the medium term, while shifting more housing stock towards owner-occupiers. She said the more significant near-term influence was coming from the four interest rate increases this year.
For property investors assessing finance and acquisition opportunities, the figures show that both borrowing costs and government policy are playing an increasingly important role in investment decisions, while the effect of lower investor participation on rental supply remains a key issue for the housing market.
SOURCE ATTRIBUTION:
Based on reporting by The Australian Financial Review, published 5 November 2026. Source: www.afr.com
