Australian property investors borrowed substantially less in the second quarter of 2026, with new loans to home investors falling more than 10% from the first quarter — a pullback most pronounced in Sydney and Melbourne — after the government curbed investment-loss tax offsets in mid-May, official data released on 14 August 2026 showed, Bloomberg reported via The Business Times.
A Policy-Timed Pullback, Not a Broad Credit Freeze
The regional split is sharp: investor lending in New South Wales, home to most of Sydney’s population, fell more than 14%, while Victoria, home to Melbourne, fell 12.5%, with borrowing by investors also down in four of the other six states and territories. Owner-occupier lending saw much shallower declines — down 1.9% nationally, though New South Wales alone saw its value of owner-occupier loans drop almost 10%. Overall, new loans fell 5.2% from the first quarter, the biggest drop since the end of 2022, with the country’s three biggest lenders separately reporting sharp falls in mortgage applications over the same period.
Prices had already started falling before May’s tax change, but the decline has accelerated since: the average price in July was down almost A$20,000 from its March peak, according to data from Cotality. Sydney and Melbourne prices peaked in November 2025 and are now down about 5% in both cities, per Cotality; other major cities and regional areas peaked later, as the Reserve Bank of Australia raised interest rates and the Iran war added to inflationary pressure. AMP chief economist Shane Oliver said in a recent report that nationwide prices will fall around 3.5% this year, with a 7% drop overall — a forecast Bloomberg frames as consistent with a policy-driven cooling rather than a market in freefall.
Zagdim’s View — For anyone holding or weighing an Australian investment property, the relevant fact isn’t the headline lending drop but its source: this is a tax-policy-triggered pullback concentrated in Sydney and Melbourne investor loans, not a broad-based credit tightening — owner-occupier lending barely moved. Data and events in this piece are current as of 15 August 2026.
References
The Business Times (Bloomberg) – Sydney, Melbourne housing investors pull back after tax changes
