Treasurer Jim Chalmers’ sweeping housing tax reforms promised to level the playing field for first homebuyers, but new data shows the number of loans being taken out has fallen off a cliff in the last three months.

It comes as the Australian Bureau of Statistics warned of the “largest quarterly falls on record” on Wednesday, as the number of investor landlords taking out a mortgage plummeted by close to a third during the same period.

New property investor loans dived by 30.6 per cent during the September quarter while the 8.6 per cent decline in first homebuyers was even steeper than the overall 5.3 per cent drop in owner-occupiers, the ABS revealed on Wednesday.

Dr Chalmers argued Labor’s Budget tax changes would take time to help more first homebuyers.

“Our tax reforms are all about helping more first homebuyers into the housing market and we expect to see those benefits play out over years, not months,” he said.

“Because of our reforms, first homebuyers will have to compete less with established investors for limited existing housing stock, and we’re starting to see that in this data.”

Total loan commitments fell by $15 billion between the start of July and the end of September, which was the largest in records going back 24 years.

This also marked the third consecutive quarterly decline in both the number and value of investor loans.

“While lending activity fell across all borrower types in the September quarter, the decline was sharpest for investors,” the ABS’s head of finance statistics Mish Tan said.

“Our data suggests that investor activity is being influenced by factors beyond increasing borrowing costs, including the potential impacts of tax changes and expectations of lower house prices.”

Housing Minister Clare O’Neil said the falling share of investors in the housing market would make it easier for first homebuyers.

“What we’re seeing is that more first home buyers are winning auctions that they’re competing in,” she told Seven’s Sunrise program.

“We’ve got a long way to go here, but we’ve got some important pieces of progress being made.”

Shadow housing minister Andrew Bragg seized on this boast to argue Labor’s Budget tax changes were failing to help property market newcomers, suggesting Ms O’Neil was living on another planet.

“We see fewer loans to first-home owners. We see fewer loans to owner-occupiers. We see fewer loans to renters,” he told reporters.

“We see fewer loans to everyone. We see fewer loans to investors. So, no one has won from these taxes, which have smashed the housing system overall.”

Even with Labor quarantining negative gearing to brand new builds from July next year, the number of investor loans for the purchase and construction of new dwellings dived by 8.7 per cent over the September quarter.

“For that reason, investment in new housing supply is expected to decline,” Housing Industry Association senior economist Maurice Tapang said.

“The full impact of the Budget changes and the rise in interest rates on housing supply won’t be fully evident in this data until mid-2027.”

The average new investor loan fell by 2.4 per cent over three months to $691,000, which was the smallest mortgage size for landlords in a year, with falls recorded in every state and territory, including in NSW where it dipped to $843,000.

When it came to owner-occupiers, the average new mortgage was $736,000 — a level smaller than the end of 2025.

The share of first homebuyer loans, by value, increased slightly to 20 per cent, up from 18.4 per cent during the June quarter covering the Budget, as the investor share fell to 30.4 per cent, down from 38 per cent.

The overall number of new home loans fell by 15 per cent to 111,878 as the value of new loans for both investors and owner-occupiers plunged by 15.5 per cent or almost $15b to $81.2b, marking the largest quarterly fall since the ABS series began in the September quarter of 2002.

Over the year, the number of investor loans plummeted by 38.5 per cent, which was significantly higher than the 21.4 per cent drop in new total loan commitments.

The annual 12.3 per cent drop in first homebuyer loans was even steeper than the 9.8 per cent fall in owner-occupier loans.

The fall in new home loans was revealed just hours after the Commonwealth Bank, Australia’s biggest home lender, revealed in a trading update that home loan application volumes had dived by 16 per cent during the September quarter.

This occurred as home loan arrears, of borrowers being 90 days or more behind on their repayments, soared to a seven-year high of 0.8 per cent.

Ashwin Clarke, a senior economist with the Commonwealth Bank, noted the plunge in investor demand was similar to the late 2010s when a banking regulator crackdown on interest-only loans last sparked such a big exodus of prospective landlords.

“The pullback in investors is a key driver of the weaker conditions in the housing market,” he said.

“This is reminiscent of the late 2010s downturn in the housing market, when investors were again the driver of conditions following tighter lending conditions and macroprudential speed limits introduced.”

The drop in new mortgages followed the Reserve Bank’s February, March, May and September rate hikes that took the RBA cash rate to a then 15-year high of 4.6 per cent.

The data pre-dated this month’s hike that took the cash rate to a fresh 18-year high of 4.85 per cent, but covered Labor’s Budget changes that scrapped negative gearing on established homes, exchanged after May 12, from July next year.

The 50 per cent capital gains tax on investment properties is also being replaced with a minimum new 30 per cent tax and indexation for inflation.