Investor housing credit hits the brakes as tax and rate changes bite

The first clear signs of Australia's investor housing slowdown are now appearing in the stock of mortgage credit.

Reserve Bank of Australia data released on 31 August show investor housing credit grew just 0.46% in July, around 0.3 percentage points slower than in June and the weakest monthly result in two years.

That is a sharp change. Owner-occupier credit also grew by about 0.46%, but its growth rate was broadly unchanged. Overall housing credit increased 0.49%, its slowest monthly pace since March 2025.

Importantly, these figures measure the stock of credit outstanding, not new mortgage approvals. Credit stocks normally turn slowly because Australia's existing mortgage book is enormous. New lending therefore tends to change first, with the effect appearing in outstanding credit later.

That process now appears to be underway. New investor housing loan commitments fell sharply in the June quarter, and the RBA has said recent weakness reflects the combined effect of softer housing conditions, higher interest rates and changes to the tax treatment of property investors.

The RBA raised the cash rate three times in the first half of 2026. The federal Budget also announced changes to negative gearing and capital gains tax that reduce the prospective after-tax return from investment property.

There is an important qualification. Housing credit is not contracting: it remains 7.4% higher than a year ago.

The signal is instead about momentum. Investor borrowing had been one of the strongest parts of the housing market. July provides the clearest evidence yet that this momentum is now reversing.

Technical note: RBA credit growth rates are seasonally adjusted, adjusted for breaks in the statistical series and include securitisations. They measure credit supplied by financial institutions operating domestically.