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Australia's second-largest lender, Westpac, has reported a decline in mortgage demand following the federal government's recent tax policy changes targeting property investors. The bank said overall mortgage applications have fallen by 10%, while investor loan applications have dropped by 20% since the measures were announced in the federal Budget. The policy changes include restrictions on negative gearing and reforms to capital gains taxation, which are expected to influence investor behaviour and slow housing credit growth. Westpac believes the measures could further moderate activity in Australia's residential property market over the coming years.
Australia's second-largest lender, Westpac, has reported a noticeable slowdown in mortgage demand following the federal government's recent tax reforms aimed at property investors.
The bank said mortgage applications have declined by 10% since the centre-left Labor government announced major housing-related tax changes in its federal Budget released in the past month. Investor lending has been affected more sharply, with applications for investor loans falling by 20% during the same period.
Westpac also expects investor housing credit growth to slow significantly over the coming years. The lender forecasts growth in investor housing credit to decline from 8.4% in 2026 to 4.4% over the following two years, reflecting weaker investor participation in the housing market.
The policy changes were introduced as part of the government's broader effort to direct more investment towards new housing supply. Under the revised framework, negative gearing benefits, which allow investors to offset property investment losses against taxable income, will be limited to newly built homes.
The government also announced that the existing 50% capital gains tax discount on assets held for more than one year will be removed. In its place, investors will be taxed on inflation-adjusted gains. In addition, a 30% minimum tax on net capital gains is scheduled to come into effect from July 2027.
The reforms come at a time when Australia's residential property market is already showing signs of moderation. Property values have been easing across several major capital cities, while auction clearance rates have fallen to their lowest levels since the pandemic period.
Speaking during an analyst briefing, Westpac's consumer banking chief executive, Carolyn McCann, said the bank had observed weaker mortgage demand since the Budget measures were announced. She indicated that the recent federal Budget policy changes had slowed investor appetite for borrowing and property purchases.
McCann also noted that allowing negative gearing to continue for existing investments, while maintaining the benefit for newly built properties in the future, should help limit some of the pressure on Australia's real estate market and reduce the risk of a sharper downturn.
The latest figures from Westpac highlight the immediate impact that tax policy can have on investor sentiment and housing finance activity. Industry participants are expected to closely monitor how the reforms influence housing supply, borrowing demand and residential property values as the new measures are phased in over the next few years.
Source Reuters
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