The September quarter lending indicators report showed new home loan commitments recorded their steepest quarterly decline since the Australian Bureau of Statistics started the series.
Total dwelling commitments fell 15% to 111,878 in the three months to September.
Investors led the record lending slump, with new investor loans plunging 30.6%.
New owner occupier loans also fell 5.3%, and first home buyer loans down 8.6%.
Investors retreat at a record pace
Property investors took the biggest step back from the housing market in the September quarter, as seen in the steep falls in both new loan number and value.
Investor loan commitments fell 30.6% to 35,301, while investor lending value dropped 32.3% to $24.7 billion.
Per the ABS, 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.
According to ABS head of finance statistics Dr Mish Tan, the investor retreat appears to reflect more than just higher borrowing costs.
"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," Dr Tan said.
The latest figures suggest many investors are choosing to sit on the sidelines as they assess the outlook for property values and changes to the investment landscape.
Several reports and data show Australia’s housing market is currently in a downturn, with home values in combined capitals falling for seven consecutive months.
See also: Former investor hotspots lead Australia’s housing downturn
Cotality earlier said sales volumes had fallen during the traditionally busy spring selling season as buyer demand weakened.
The September quarter lending data reflect the impact of the ongoing interest rate increases and new investor tax changes announced in the May federal budget.
Are investors building instead?
Based on ABS lending data, it seems investors have not shifted in large numbers towards new builds as the recent tax reforms had hoped.
The number of investor loans for the construction of new dwellings declined 16.3% compared to the June quarter.
See also: New build vs Established: Which property investment wins
The Housing Industry Association warned that the full impact of the May budget and elevated interest rates on housing supply is yet to materialise in mid-2027.
"The ring fencing of new home building from the increase in tax does not prevent investors in new housing incurring higher taxes, as outlined in this year’s federal budget," HIA senior economist Maurice Tapang said
"For that reason, investment in new housing supply is expected to decline."
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