The latest housing finance data for September shows further drops in both the value of dwelling commitments and the number.
New lending has now dropped to its lowest level since August 2014.
The value of owner occupier loans is at its lowest level since July 2015, after a drop in value of 4.2% from the month before to $19.3billion, in seasonally adjusted terms.
In terms of the number of commitments, September saw 2,539 loans for the purchase of new dwellings, which was a decrease of 3.9%.
The number of loans for the construction of dwellings was 5,310, which was a decrease of 3.5%.
The smallest drop was 0.5% which was for the purchase of established dwellings, where there were 42, 824 loans.
Lending to investors is now at the lowest it’s been since 2013, according to Master Builders Australia’s chief economist Shane Garrett.
A total of $9.75billion worth of loans was written, in seasonally adjusted terms, which was a decrease of 2.8% from the month before.
Garrett said, “[The] ABS results mean that housing investor loans have fallen to their lowest level since July 2013 and are down by 18% over the past 12 months alone.
“There are several explanations for the decline in investor participation in the housing market. Since house prices in Sydney and Melbourne started falling last year, investors have been deprived of a major carrot.
“Rental prices are rising more slowly than at any time in a quarter of a century. This is great news for renters, but won’t put many smiles on the faces of investors.
“Perhaps the biggest game changer has been APRA’s interventions which have made it more difficult for investors to secure financing. The ongoing Royal Commission has also made lenders more jittery.
“Master Builders recent modelling showed that more restrictive policies around Negative Gearing and the CGT discount would result in between 10,000 and 42,000 fewer new dwellings being built across Australia.
“With investor demand already in retreat, any policy changes at this time would be very detrimental for Australia’s home building sector.”
RateCity research director Sally Tindall said there was opportunity for first home buyers, as those numbers increased by 0.2% in September.
She said, “This time last year, no-one predicted the falls in new lending would be this significant, particularly for owner occupiers.
“The housing market was only just coming off the boil and the Hayne Royal Commission hadn’t yet been announced.
“The good news now is the door is wide open for first home buyers, provided they’ve got a decent deposit saved up.
“Banks are still in the business of writing loans. It just takes a bit more time and paperwork."