Property market hit by high interest rates and tax changes pushes investors out | The Business

Higher interest rates and budget tax changes to the capital gains tax discount and negative gearing are hitting the housing market. The Commonwealth Bank says home loan arrears rose in the September quarter. While that’s not translating into loan losses yet, CBA is provisioning for that potential.

Independent property economist Cameron Kusher says it’s not surprising there’s been an uptick in arrears, but he doesn’t think there will be a further uplift in the number of people behind on their mortgage. However, that does not mean the pressure is likely to come off households. “I think, though, that the pressure on households actually comes before people get into arrears. So these five interest rate hikes we’ve had already this year, the possibility for more interest rate hikes, a lot of people are probably stretched… and if they do need to move on from their mortgage, they’re trying to do that before they get into a position where they go into mortgage arrears,” he said.

Official data also shows new home lending fell the most on record in the September quarter. It was led by investor loans, which dropped off a cliff, down 30.6 per cent in the period. “I thought we would see a pullback. I didn’t think that we would see a pullback this significant … I think it really highlights that investors are unsure how to proceed,” he said.

Mr Kusher says first time buyers have seen a bigger pullback than owner-occupiers in the market.” On top of the budget tax changes, there’s also interest rate increases and the ABS also pointed to worries about falling home prices,” he said.
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