- Australian mortgage demand plunged fourteen percent in June twenty twenty-six due to tax reforms.
- First-home buyer demand saw its steepest monthly decline in nearly four years at seventeen percent.
- New property tax changes have reduced investor borrowing capacity by up to twenty percent.
Australian mortgage demand fell 14% in June 2026, as property-tax reforms and elevated borrowing costs pushed buyers and investors away from new loans.
Equifax recorded a 17% drop among first-home buyers, the group’s steepest monthly decline in nearly four years. Investor lending demand fell 12.7%.
The June figures accelerated weaker results from May. First-home-buyer demand had declined 13% that month, while investor demand fell 9.8%.
Free toolCSPA Age-Out Calculator OnlineA separate Westpac measure showed investor applications dropping 20% during the three weeks before June 10, 2026. The bank’s data differs from Equifax’s national monthly measure, but points in the same direction.
The reaction intensified after Treasurer Jim Chalmers introduced the May 2026 federal budget. Auction clearance rates fell to 43.1% after the May 12 announcement, according to the market figures.
Kevin James, chief solution officer at Equifax, said the retreat had moved faster than expected.
“The decline has been more rapid than expected. The drop for first-home buyers has likely been caused by a combination of higher interest rates and uncertainty about their direction, scepticism about house prices, and the lack of affordability.”
Victoria and New South Wales recorded even steeper falls
The national decline was worse in the two largest state markets. Demand fell 15.9% in Victoria and 15.0% in New South Wales.
Capital-city sales also weakened. Cotality recorded a fall from 32,863 sales to 27,342, a decline of nearly 17%.
| Measure | Earlier result | June 2026 result |
|---|---|---|
| Total mortgage demand | Down 10.9% in May | Down 14% |
| First-home buyers | Down 13% in May | Down 17% |
| Housing investors | Down 9.8% in May | Down 12.7% |
| Victoria | Not stated | Down 15.9% |
| New South Wales | Not stated | Down 15.0% |
The figures come from different measures. Equifax supplied the June national demand results, while Cotality supplied the capital-city sales data and Westpac supplied its separate investor-applications measure.
Tax changes reduced the appeal of leveraged investment
The budget removed the 50% capital gains tax discount and made major changes to negative gearing. Market analysts said the measures could reduce investors’ borrowing capacity by 10% to 20%.
The changes targeted property-tax concessions that investors had used when assessing prospective returns. Without those benefits, some rental yields no longer appeared to stack up under high-leverage strategies.
Investor mortgage applications had already fallen 23% by the end of May, while first-home-buyer applications declined 12%. Those figures predated the June Equifax results and should not be treated as another version of the monthly national data.
Tim Lawless, research director at Cotality, said the budget would likely produce a “notable decline in investment activity.” Property analyst Nerida Conisbee said rates, tax changes and global uncertainty were restraining the market.
Westpac analysts forecast a 34% drop in new investor engagement and a 20% decline in real-estate transaction volumes this year. Those are projections, not recorded June outcomes.
Borrowing costs kept buyers cautious
The Reserve Bank of Australia held its cash rate at 4.35% in June. That followed rate increases in February, March and May.
The rate decision left borrowers facing higher repayment costs as confidence weakened. First-home buyers also confronted doubts about affordability, house prices and the future direction of interest rates.
Global conditions added pressure. The Middle East conflict drove oil prices higher, while inflation reached 4.2% in May 2026. The resulting pressure encouraged central banks to maintain higher-for-longer rate policies.
Some prospective buyers in Sydney and Melbourne were avoiding the market because prices had begun trending downward. Their concern was described as a fear of “catch a falling knife.”
Lenders face weaker volumes and lower property collateral
The slowdown has implications beyond loan applications. Moody’s Ratings Agency said the tax reforms could pressure Australian bank earnings and that softer house prices could reduce the collateral supporting bank loan portfolios.
“The tax reforms will pressure earnings of Australian banks. Softer house prices will reduce the collateral value of bank loan portfolios and potentially lead to an increase in loan impairment charges.”
Carlos Cacho, a banking analyst at Macquarie Group, said the deterioration had exceeded expectations and pointed to weaker lending ahead.
“The pace of deterioration has surprised us, and suggests potential downside risk to our views. we expect lending volumes to fall in the year ahead.”
Investors are responding by delaying purchases or selling existing properties as the revised tax rules make highly leveraged strategies less attractive. First-home buyers, meanwhile, have not filled the gap left by retreating investors.
Westpac’s broader outlook reflected that tension. Its analysts expect new investor engagement to decline 34% and real-estate transaction volumes to fall 20% this year, while the central bank’s cash rate remains at 4.35%.
