Almost one in three to invest in anything but housing

PROPERTY investors are “delaying purchases, reassessing strategies and redirecting capita,” according to a new report.

Data from the Loan Market Group shows appetite for new mortgage lending has fallen 24 per cent since January in response to the government’s tax changes and four interest rate rises, with investors recording the largest pullback in borrowing activity.

Investor mortgage lodgements were down by as much as 44 per cent in some markets, led by Queensland and Western Australia, according to the data.

Property Investment Professionals of Australia chair Cate Bakos said the findings were consistent with the 2026 PIPA Annual Investor Sentiment Survey, which found a significant number of investors were already reconsidering future investment plans.

“The Loan Market figures suggest we’re now seeing investor behaviour catch up with investor sentiment,” Bakos said.

“Our survey found that many investors were already indicating they would delay purchases, scale back acquisition plans or look beyond residential property for future investment opportunities.

“When investors lose confidence in the policy environment or become concerned about future returns, the first thing they tend to do is stop borrowing and wait on the sidelines.”

Bakos said the pullback is a significant issue because private investors provide the overwhelming majority of Australia’s rental housing.

“A sustained decline in investor activity ultimately means less capital flowing into the residential market at a time when the nation is already grappling with chronic housing undersupply,” she said.

“I’m also not surprised that the investor lending data has followed the sentiment survey findings by a few months, because the data reporting involves time lag.”

The survey found that only 18.2 per cent intended to continue investing in residential property without changing course, while 14.6 per cent said they were less likely to invest in residential property because of the tax changes.

Another 27.8 per cent said they were more likely to invest in alternative assets such as shares, managed funds or superannuation instead.

Almost one in 10 respondents said they were reducing investment activity across all asset classes, while a further 18 per cent remained uncertain and were still assessing the impact of the reforms.

The survey also showed investor appetite for new housing supply remains subdued despite the retention of negative gearing and capital gains tax incentives for newly-built property.

More than half of respondents (50.7 per cent) said they were avoiding new builds because they preferred established properties, while 17.3 per cent said concerns about settlement delays, fringe locations and builder or developer risks had made them less willing to invest in new housing.

Just 4.8 per cent said the preservation of tax benefits made them more willing to invest in newly-built dwellings.

Bakos said the findings challenge the notion that investors would simply redirect their capital into new housing construction.

“The assumption that investors will seamlessly switch into new housing supply isn’t reflected in the data,” she said.

“Investors consider a wide range of factors when making decisions, including risk, borrowing capacity, location, price, project viability and confidence in future policy settings. Tax treatment is only one part of that equation.

“What we’re seeing is a broader caution among investors, and that caution is now starting to show up in lending activity.”

The survey also found that 16.1 per cent of investors said they were investing less in new housing supply as an unintended consequence of the reforms, while 82 per cent said they were either not very confident or not confident at all that future governments would maintain stable and predictable tax settings for property investors.

Bakos said the combination of falling lending activity and weakening investor confidence should be viewed as an important signal for policymakers.

“Australia cannot solve its housing challenges without encouraging private investment,” she said.

“If borrowing activity continues to weaken and investors continue to step back from the market, the flow-on effects will eventually be felt through rental supply, housing choice and affordability.

“That’s a risk policymakers should be paying close attention to.”

The Loan Market data also found that the number of first home buyer loan lodgements had fallen by 13 per cent nationwide since January, with NSW and Queensland posting falls of 19 per cent and 18 per cent respectively.

“The supposed intention of the government’s reforms to negative gearing and CGT was to increase first home buyer activity but the opposite is occurring,” Bakos said.

“The modelling that was applied to the decision was always rubbery and the drastic drop in first home buyer borrowing proves it.”