Highlights

  • Investor housing credit growth slowed to 0.32% in August 2026, about a third of its December 2025 peak.
  • Negative gearing will be limited to new builds from 1 July 2027, with properties held by 12 May 2026 grandfathered.
  • National home values fell 1.1% in September, the sixth monthly decline in a row, leaving the median at $899,236.
  • Approvals for apartments dropped 24.9% in August, even as the policy aims to steer investors towards new housing.

Investor housing credit was growing at 0.95% in December 2025. By August 2026 it had slumped to 0.32%, roughly a third of that peak. Borrowers who once rushed to lend against rental property are now stepping back, just as enacted limits on negative gearing and a rebuilt capital gains tax discount edge towards their 1 July 2027 start.

What the credit figures show

The Reserve Bank's credit aggregates put investor credit growth at 0.32% in August 2026. That is still growth rather than contraction: the stock of investor lending keeps expanding, only far more slowly than before the May Budget.

Prices and yields add pressure. Cotality's Home Value Index for September, released on 1 October, showed national values down 1.1% for the month, a sixth consecutive fall. The national median of $899,236 sits 5.2% below the March 2026 peak.

With gross yields at 3.7% and values sliding, an investor leans harder on deductions and future growth. Interest rates and lender serviceability tests also play a part.

The rules investors are weighing

The ATO's tax reform page, last updated on 29 June 2026, says the measures "are now law" under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026. Both start on 1 July 2027.

From that date negative gearing is restricted to new builds. The 50% CGT discount gives way to indexation plus a 30% minimum tax for individuals, trusts and partnerships, applying only to gains accruing after 1 July 2027.

The ATO page does not yet define a "new build" or explain how indexation and the minimum tax will be calculated. Draft law released in August offers part of the answer: a property is generally new if it "genuinely adds to housing supply" and is acquired within 24 months of a certificate of occupancy. The Budget had said 12 months, and it remains a draft.

Hypothetical example: grandfathered or caught

Take two investors, each on a $150,000 salary and each holding an established unit with a $600,000 interest-only loan at 6%. Interest is $36,000 a year, other deductible costs are $4,000, and rent is $28,000, leaving a $12,000 net rental loss.

Investor A bought before 7:30pm AEST on 12 May 2026, so the unit is grandfathered. Offsetting the loss against salary saves about $4,680 a year, being $12,000 at 37% plus the 2% Medicare levy.

Investor B bought a comparable unit in September 2026. The loss can still be offset in 2026-27, but from 1 July 2027 the property falls outside the new-build rules, and that saving of roughly $4,680 disappears. How disallowed losses will be treated is not set out, so B may need to await guidance.

A strong baseline and a patchy pipeline

The next big test is the ABS Lending Indicators release for the September quarter of 2026, the first full quarter after the Budget. Its release date is unconfirmed. It will be measured against a record base: September quarter 2025 recorded 57,624 investment loans, up 13.6%, worth $39.8 billion, up 17.6%.

Supply data is mixed. Total dwelling approvals fell 6.1% in August 2026. Private house approvals rose 3.7% to 10,885, up 18.4% on a year earlier. Approvals excluding houses fell 21.2% to 5,674. One month is not a trend, but those are the homes many investors buy.

What to watch

Monday 2 November: Cotality's October index shows whether the falls extend to a seventh month. Tuesday 3 November: the Reserve Bank's cash rate decision, where any rise would lift costs for variable-rate investors.

Still ahead: the ABS lending figures, and before 1 July 2027 final law on new housing plus ATO guidance on indexation and the minimum tax.