Westpac Banking Corp reported a 20% [1] fall in mortgage applications after the Australian government scrapped property tax breaks for investors.
The decline signals a potential shift in the Australian housing market as the financial incentive for property investment weakens. This trend could impact overall credit growth and property valuations across major cities.
Westpac, which is the second-largest lender in Australia, said the drop in applications occurred Monday [1]. The decrease follows a policy decision by the government to eliminate specific tax advantages previously available to those purchasing investment properties [1], [2].
Beyond the immediate drop in applications, the bank provided a grim outlook for the coming year. Westpac said investor housing credit growth for next year will be halved [1]. This represents a reduction to approximately 50% of current levels [1].
Analysts said the removal of these breaks makes the cost of holding investment properties significantly higher. This shift typically discourages speculative buying, a primary driver of mortgage volume for large commercial banks.
The bank's findings highlight how sensitive the domestic mortgage market remains to legislative changes regarding taxation. While owner-occupiers may not be as affected, the investor segment has historically provided a substantial portion of loan growth for the Sydney-based lender [1].
“Westpac reported a 20% fall in mortgage applications”
The sharp decline in mortgage applications indicates that investor demand in Australia is highly dependent on tax incentives rather than organic market growth. If credit growth continues to halve as Westpac predicts, the broader economy may see a cooling of property prices, potentially reducing the housing bubble risk but also slowing the growth of the banking sector's loan portfolios.
