New lending figures suggest the established property investor market has all but collapsed since the federal budget scrapped negative gearing benefits for existing dwellings, according to Property Investment Professionals of Australia (PIPA).
Under the reforms, which took effect from budget night, negative gearing is removed for established dwellings bought after 12 May 2026, effective from 1 July 2027, while existing holdings are grandfathered and new builds remain exempt.
The Australian Bureau of Statistics' Lending Indicators for the June quarter, released this week, recorded an 8.6% drop in new investor loan commitments over the period — the sharpest quarterly fall since September 2022.
PIPA chair Cate Bakos (pictured) attributed the pullback to affordability rather than confidence, pointing to cases where clients' borrowing capacity has been cut dramatically now that negative gearing can no longer offset holding costs.
"This isn't about sentiment. It's about maths," Bakos said.
Bakos said the retreat was already stark.
"Established property investors – outside of self-managed super funds for a very brief window – have pretty much left our market since the 12th of May," she said.
Bakos estimated only a small fraction of investors remained active.
"Maybe 2% still exist. Aside from SMSF purchasers up to the 10th of August, the only client I've had any investment activity with recently was an international buyer who wouldn't have received negative gearing anyway," she said.
The scale of the pullback shows up in the lending data too: Canstar's analysis of the same ABS figures found investor loan commitments fell $4.2 billion — a 10% drop, the largest in dollar terms since 2015, while owner-occupier lending recorded a more modest fall.
Canstar data insights director Sally Tindall attributed the retreat to a combination of factors: "Investors led the retreat, with the value of these loans dropping $4.2 billion or 10%, after three interest rate hikes and the federal government's property tax changes have taken plenty of shine off the property market."
Bakos cautioned that the June quarter data captures only the first half of the post-budget period, meaning the full effect on lending volumes has not yet shown up in official figures.
Early findings from PIPA's Annual Investor Sentiment Survey — now in its 12th year, with full results due mid-September — reportedly point to a broader pivot away from residential property altogether, with many investors signalling they'll redirect capital into shares or superannuation instead, even where new-build incentives remain in place.
PIPA warned the pullback in investor activity would add to existing rental market strain, particularly across established inner- and middle-ring suburbs, as vacancy rates tighten and displacement pushes tenants toward outer-suburban and regional areas.
That strain is already visible in the data: SQM Research's latest figures show the national vacancy rate held at 1.3% in July, with five capital cities still below 1%.
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