Ignore the doomsdayers – property investing in Australia is far from broken
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Ignore the doomsday warnings about the government’s tax changes – property investing in Australia is a little bruised, but it’s far from broken.
The country’s biggest mortgage lender, Commonwealth Bank, reported a bumper $11bn full-year cash profit on Wednesday, backed by robust demand for its lending products, especially mortgages.
It has long benefited from surging demand from property investors who took out $45bn worth of loans in the last six months of 2025, and a further $37bn in the first half of this year.
There are two main reasons for the pullback in 2026: the Reserve Bank has lifted interest rates three times and the federal government amended negative gearing and the treatment of capital gains tax, making some types of property investment less lucrative.
The bank disclosed that investor loan applications were down 28% since the Labor tax changes were announced in the May budget, while owner-occupier applications had dropped 9%.
The government’s property tax changes have become one of the defining political issues of Labor’s second term.
Designed to help prospective first home owners, they have drawn fierce criticism from opponents who argue they represent an “assault on aspiration” that will destroy home values.
Interest rates were already weighing on mortgage applications going into May. The budget has clearly added to the existing slowdown.
RBA data shows owner-occupier new loans have fallen by roughly 10% since the start of the year, while investor loan growth has fallen by about 25%.
Yet the slump in investor demand – the explicit goal of Labor’s tax changes – already looks to be turning around.
CBA’s chief executive, Matt Comyn, said on Wednesday the worst had passed by late June and applications were now a little higher and holding steady.
“Things seem to have stabilised and we expect an improvement into … 2027.”
Comyn repeatedly told analysts on Wednesday he believed Australia was at the bottom of its investor decline.
CBA is still receiving close to three applications for every four it received before the budget changes and expects landlord borrowing to pick up from here.
‘It will correct’
An average of 19,000 investor loans entered the housing market each month at the start of 2026, worth a combined $14bn.
Even if a 25% fall in investor borrowing became the new norm across the banking system, some 14,000 new landlords would take out a loan each month.
Nor is the budget the sole, or even dominant, factor behind the slump in home loans and prices.
Comyn on Wednesday blamed the slowdown on rising interest rates, inflation, buyer confidence and the strain on the global economy.
Westpac’s chief financial officer, Nathan Goonan, on Monday said interest rates were the dominant influence on the housing market, outweighing the tax reforms.
His bank has seen applications slump 18% for owner-occupiers and 26% for investors but is still predicting slow, steady growth in home lending supported by a rate cut next year.
The RBA governor, Michele Bullock, made clear on Tuesday that interest rates were still more likely to rise than to fall, saying she would not be held captive by a slumping housing market.
Bullock believes the slump is going well beyond the interest rate fundamentals thanks to an outsized loss of confidence and has previously argued the slowdown will “settle down” once confidence returns.
She laid out the best argument for investing in housing – and one that hasn’t changed since the budget.
“We still have a shortage of supply relative to housing,” Bullock said.
“Ultimately, that is going to resolve somehow in prices, so it will correct.”
• Luca Ittimani is a business and economics reporter and Jonathan Barrett is business editor at Guardian Australia
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