Scale of property investor exodus smashes records

Property investors are now as scarce as thylacine sightings.

With property prices in freefall, negative gearing incentives gone and capital gains tax discounts off the table, investors have exited the market in record numbers.

The Federal Budget measures unveiled in May were intended to make property more affordable for first home buyers but with the threat of negative equity looming over any current purchase, they too are nowhere to be seen.

Falls in investor lending accelerated to almost double the previous record. The number of new investor loans fell 30.6 per cent to 35,301 loans over the quarter while the value fell 32.3 per cent to $24,705 million.

This marks the third consecutive quarterly decline in both the number and value of investor loans and is the largest quarterly fall on record for both series. 

The decline was broad-based, with strong falls recorded in all states and territories. 

Through the year growth in the number of new investor loans has fallen from 24.9 per cent in the December quarter 2025 to -38.5 per cent in the September quarter 2026. 

Overall, the number of new home loans fell 15.0 per cent to 111,878 in the September quarter 2026, according to data released Wednesday (11 November) by the Australian Bureau of Statistics (ABS).

The value of new home loans fell 15.5 per cent to $81,157 million this quarter, the largest quarterly fall since the commencement of the series in September quarter 2002.

This continues the downward trend seen throughout 2026.

Dr Mish Tan, ABS Head of Finance Statistics, said that while lending activity fell across all borrower types in the September quarter, the decline was sharpest for investors.

“Our data suggests that investor activity is being influenced by factors beyond increasing borrowing costs, including the potential impacts of tax changes and expectations of lower house prices.”

Owner-occupier demand also retreated 5.3 per cent to $56.5 billion.

The decline in first home buyers gathered momentum, down 8.6 per cent.

Maree Kilroy, Lead Economist for Oxford Economics Australia, said that despite low-deposit schemes helping first home buyers enter the market, lenders now assess serviceability at rates above 9 per cent, which limits how much they can borrow.

“Recent first home buyers are the most exposed to negative equity, and to arrears if unemployment rises.

“We expect arrears to pick up further from current lows, but they should remain manageable rather than driving forced sales and a further rise in listings.”

Ms Kilroy said investor tax changes in the May Budget are compounding the drag from repeated rate hikes, which have cut borrowing capacity.

“This is occurring alongside cost-of-living pressures and falling property prices hitting buyer confidence.

“We expect new home lending to keep contracting over the coming year, with investor loans to fall twice as fast as owner-occupiers.”

Owner occupier lending continued to fall

The quarterly fall in owner-occupier loans was driven by Queensland (-10.4 per cent), Victoria (-6.6 per cent) and New South Wales (-4.1 per cent).

The number of owner-occupier first home buyer loans fell 8.6 per cent during the quarter, following a 4.4 per cent fall in the June quarter.

Lending to first home buyers was 12.3 per cent lower than a year ago.

Owner-occupier first home buyers continued to account for more than one-third of owner occupier commitments, remaining a significant share of owner occupier lending.

HIA Senior Economist, Maurice Tapang, said the full impact of the Budget changes and the rise in interest rates on housing supply won’t be fully evident in this data until mid-2027.

He added that the only bright spot in this quarter’s lending indicators data has been business lending for new home construction.

“This could suggest that in the absence of ‘mum and dad’ investors and owner-occupiers choosing to build a new home, that builders are constructing Spec homes to protect their sub-contractors from exiting the industry.

“It could also be SMSF’s financing new home building ahead of the prohibition on SMSFs financing from 10 August 2026.”

Jobs a source of concern

Australia’s unemployment rate has tipped up to 4.7 per cent, the highest rate since October 2021, and a swathe of headlines have sent tremors through the property market.

Losing a job with a mortgage to pay can lead to distressed sales that dampen the market, while others hold off purchases until they’re job security is in place.

Economists say the jobs market is softer but has not yet cracked, but the headlines are becoming more unsavoury.

Canva, Woodside Energy, NAB, Qantas and David Jones have all announced job cuts, offshoring or insolvency steps in recent days.

The latest ABS figures showed almost 40,000 people lost their jobs in September, and 732,000 people were unemployed nationwide.

AI has stoked fears of a wave of job losses but for now it’s the disconcerting trend of businesses shifting jobs off shore that is having more of an impact.

Qantas said on Tuesday it would cut 850 jobs in Australia and ‌outsource some corporate functions to consulting firm Accenture as it adapts to the increased use of artificial intelligence in the airline industry.

While moves on that scale are disturbing, the ABS reports that AI remains more a source of fear than actual job losses at this stage.

Sean Crick, ABS Head of Labour Statistics, said data released Wednesday (11 November) by the ABS showed that AI has had a limited impact on job vacancies to date.

“About 82 per cent of businesses reported that AI did not impact the level of job vacancies in August 2026,” Mr Crick said.

“Four per cent of businesses reported that AI had reduced the number of job vacancies in August, while less than one per cent reported that AI had led to an increase in vacancies in their business.” 

The impact of AI on job vacancies differed across industries. “Information media and telecommunications had the highest proportion of businesses reporting a decrease in vacancies due to AI at 16 per cent,” Mr Crick said.

“This was followed by Wholesale trade, at eight per cent, and Manufacturing, at six per cent."

The industries with the highest proportions of businesses reporting an increase in vacancies due to AI were Electricity, gas, water and waste services (10 per cent), Public administration and safety (four per cent) and Health care and social assistance (two per cent).

So, the impact of job losses on the property market for now remains more one of potential than reality.

Higher unemployment may also encourage the RBA to hold off on any more interest rate hikes while it assesses the impact on inflation of its raft of increases in 2026.