Investor loans fell 9% after the Budget, but loans for new homes rose 24%

The number of new loans to property investors fell 9% in the June quarter, three times the fall for owner-occupiers, while investor loans to buy or build new homes rose 24%. Those are the headline findings of the PropTrack Terri Scheer Investor Report 2026, released on 13 October. It is the clearest picture yet of how investors have reacted to the May Budget.

+24%

What the report found

Investor lending peaked at more than 60,000 new loans in the December quarter 2025, according to PropTrack, before rate rises started to bite. The ABS lending indicators for the June quarter show 52,599 new investor loan commitments, down 8.6% in number and 10.2% in value on the March quarter. Owner-occupier loans fell 3.3%.

PropTrack's senior economist Angus Moore and economist Luc Redman argue the difference matters. Higher rates hit every buyer. A fall in investor lending three times the size of the owner-occupier fall points to the tax changes, plus the uncertainty while investors worked out what the changes meant for them.

The report expects the long-run effect to be modest. It cites Budget estimates of an average of 7,500 extra first home buyers a year, implicitly in place of investors, against 150,000 to 200,000 purchases a year in total.

Why new builds are winning

The tax changes treat new and established homes differently. We covered the detail in our explainers on negative gearing and CGT. In short:

• Established homes bought after 7:30pm AEST on 12 May 2026 lose negative gearing from 1 July 2027. Losses are quarantined and carried forward against future residential property income or gains.
• New residential builds keep full negative gearing against all income, and at sale the owner can choose either the 50% discount or CPI indexation.
• Properties held before the Budget are grandfathered.

That is the policy working as designed. PropTrack calls the jump in new-home lending "a deliberate outcome of the budget changes". Note one gap the report flags itself: the exact definition of a new home for the exemption has not been settled yet.

Yield is back in fashion

Before the Budget, many investors chose growth over income and used rental losses to cut tax on their salary. PropTrack notes that in most years more than half of individual investors report a net rental loss. For established homes bought from 12 May, that route is closing.

Early evidence suggests investors have noticed. Since the Budget, the share of investor enquiries going to higher-yielding properties has risen. Investors are over-represented in the more affordable, higher-yielding parts of each capital, such as south-west Sydney, Melbourne's west and Perth's south, and on the Gold Coast and Sunshine Coast in south-east Queensland.

The market is helping. Cotality's national gross yield reached 3.85% in September, the highest since August 2019, because values are falling while rents are still rising. As Moore put it in the report's release, "Low-yielding and loss-making rental properties are likely to become less attractive to investors."

Investors are not rushing for the exit

There is little sign of a sell-off. PropTrack says the national pace of investor sales is around what has been typical in recent years. Investors make up a high share of new listings in Sydney and Melbourne, as they have for the past couple of years, and investor listings in the smaller capitals have picked up since late 2025 as some owners cash in on six years of strong growth.

Two forces pull in opposite directions. Grandfathered negative gearing gives existing investors a reason to hold, because selling gives it up for good. The CGT change from 1 July 2027 gives some a reason to sell sooner. The report expects some investors to move from low-yielding, loss-making properties into higher-yielding ones.

Most who sell still make money. PropTrack found 93% of investor resales so far in 2026 sold above the purchase price, with a median hold of 9.6 years and a median gain of $345,000 among profitable sales. The profitable share slipped to 91% in the three months to July. Melbourne is the weakest at 85%. Those gains are before interest, tax, maintenance and other holding costs.

What this means for landlords

1. If you already own, nothing changes for that property. Grandfathered properties keep negative gearing indefinitely. Selling to buy another established home means the new one sits under the new rules.
2. Run any new purchase on cash flow, not tax. For an established home bought now, a rental loss is deferred, not deducted against your salary. Work out whether the property can carry itself at today's rates before you count on growth.
3. Do not buy new only for the tax treatment. New builds keep the concessions, but the definition of a new home is still to be settled, and new apartments have their own risks around build quality, oversupply and resale. Get advice on the specific property.
4. Check your yield against your holding costs. At 3.85% gross, the national average still does not cover interest at the roughly 6.75% investors are likely paying once September's rate rise is passed on. A higher-yielding property narrows the gap; it rarely closes it.
5. Watch 11 November. The ABS September quarter lending figures will show whether the shift to new homes held up for a full quarter after the Budget.

The short version: investors are not leaving, they are changing what they buy. As Terri Scheer's Carolyn Parrella put it, "investors aren't necessarily leaving the market, they're adapting to it."