Investor Loan Lodgements Plunge 35% After Budget Tax Changes

Loan Market Group's July data shows investor mortgage applications in freefall since May's budget overhauled negative gearing and capital gains tax settings.

The Steepest Pullback in Years

Australia's home loan market is recording its steepest pullback in years, with total lodgements by number down 26% nationally since early February, according to Loan Market Group's July 2026 market report. That decline spans every borrower type, but investors have borne the heaviest load.

Investor lodgements have fallen 35% by value and 31% by number since February — the sharpest decline of any borrower category tracked by the group. The May federal budget wound back negative gearing for established residential properties purchased after budget night, meaning rental losses can no longer be offset against other taxable income for newly acquired existing homes. The capital gains tax discount on newly acquired investment assets was also removed.

Three Reserve Bank of Australia cash rate increases since early February have compounded the effect, cutting borrowing capacity at the same time as the tax concessions underpinning many investment strategies were withdrawn.

"The last six months have been challenging for many buyers," Loan Market Group executive chairman and chief executive Sam White told MPA Australia. "We have seen a retraction in investors since the federal budget with many likely taking some time to reevaluate their strategies."

New Builds vs Existing Properties: A 25-Point Gap

The budget's design is visible directly in the data. New-build investment properties remain eligible for negative gearing under the reforms, and lodgements for that segment are down a comparatively modest 15% since February. Existing residential properties — now excluded from the concession — have seen lodgements collapse 40%.

That 25-percentage-point difference reflects how investors are reading the changed incentives. Properties where the tax treatment stayed intact are seeing a pullback roughly one-third the size of those where the concession was removed.

White flagged additional caution around price direction: "The slowdown in price growth has also led to some hesitancy with buyers not wanting to catch a falling knife."

For investors reassessing their approach, our investor home loan hub covers the current lending landscape, including which lenders are still actively competing for investor business.

First Home Buyers and Upgraders

Investors are not the only group pulling back. First home buyers have seen lodgements fall 23% by number and 19% by value since February — a significant retreat for a cohort already facing average house prices now sitting above a million dollars nationally.

White described the squeeze plainly: "First-home buyers have been greatly impacted by the increased cash rate, which has hit their borrowing power. The high cost of living combined with high average house prices — now sitting over a million dollars — has also made repayments unmanageable."

Owner-occupier upgraders have proven more resilient, with lodgements down a comparatively smaller 14% by number. Existing homeowners carry equity that buffers them against tighter lending conditions and shifting tax settings — an advantage first-time buyers and new investors do not have.

Our first home buyer hub outlines current lender policies and the support schemes still available for eligible borrowers.

State by State: Regional Markets Hit Hardest

The slowdown is unevenly distributed. Victoria has recorded the smallest decline at 19% by number, which Loan Market Group partly attributes to a softer starting base heading into 2026. New South Wales lodgements are down 25%, Queensland 27%.

Regional markets across South Australia, Western Australia, Tasmania, the ACT, and the Northern Territory have seen the steepest falls, with lodgements down 32% by number. Those markets tend to be more exposed to rate movements given lower average incomes and a higher concentration of variable-rate borrowers.

What the Second Half of 2026 Looks Like

Three variables will shape whether the market finds a floor before year's end. First is the RBA's August 11 cash rate decision: another hike would extend borrowing cost pressure across all categories; a hold would at least stabilise the environment. Auction clearance rates have troughed in the high-40s across combined capital cities, suggesting the pace of decline in buyer activity may be easing.

Second, spring listings are expected to pick up around September, which historically brings fresh supply and renewed buyer interest. Third, economists have flagged the possibility of a fourth cash rate hike before year's end — an outcome that would extend the current slowdown further.

White offered a cautious positive: "The silver lining is reduced competition has led to opportunities for those in a position to purchase, including upgraders and savvy first-home buyers."

Use our refinance savings calculator to model how a rate change in August would affect your repayments, and whether securing a better deal now makes sense ahead of the next RBA decision.

MPA Australia, "Investor mortgage applications plunge as Budget tax reforms bite"