Property investors are pulling back on established housing, while lending for new homes and interest in higher-yielding rentals have risen, according to the PropTrack Terri Scheer Investor Report 2026.
The report found investor loans fell 9% over the June quarter, following a strong 2024 and 2025. The decline came after this year’s interest rate rises and the May federal budget, which announced changes to the capital gains tax discount and negative gearing for established residential properties.
Lending to investors buying or building new homes moved the other way, rising 24%.
“The findings show investors aren’t necessarily leaving the market, they’re adapting to it,” said Carolyn Parrella, executive manager at landlord insurer Terri Scheer.
Around 93% of investment properties sold so far in 2026 fetched more than their purchase price.
Investor demand fell after the budget and has since partly recovered, though it remains short of last year’s highs. Since the tax changes were announced, enquiries on realestate.com.au have tilted towards properties with stronger yields that can pay for themselves.
Angus Moore (pictured left), senior economist at realestate.com.au, said the loss of negative gearing for existing homes was likely to make low-yielding and loss-making rentals less appealing over the long term. He added that tight rental conditions and rising rents, alongside softer home prices, should help support investor activity over the coming year.
Ray White Group chief economist Nerida Conisbee (pictured right) sees the rental squeeze from a different angle. She said weaker investor activity was reducing the flow of new rental housing into an already tight market.
“Lower house prices therefore do not necessarily mean housing conditions are becoming easier,” she said.
Rents and values have been moving in opposite directions. According to Conisbee, combined capital city dwelling values fell 4.3% over the September quarter, while rents are 5.5% higher than a year ago.
Trend dwelling approvals reached 18,202 in August, Conisbee said, below the average of 20,000 a month needed to meet the target of 1.2 million homes over five years.
Development is also becoming harder to make viable. Conisbee said the cost of a new dwelling has risen by around 48% since the end of 2019, with new dwelling prices up 5.4% in the year to August, even as established values decline. With labour, construction, and finance costs still high, fewer projects make financial sense when the established homes they compete with are getting cheaper.
With higher mortgage rates also squeezing borrowing capacity, she warned of a cycle in which weaker prices discourage building, leaving fewer rentals and new homes once demand recovers.
“The risk is that today’s price falls make tomorrow’s housing shortage worse,” Conisbee said.
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