Investors Step Back: Credit Growth Slows to Its Weakest Since January 2024

The combined capitals cleared a preliminary 47.2% on 1,735 auctions, down from 48.4% on 1,882 a week earlier and the lowest preliminary print since at least late June. Of 1,172 results collected, 561 sold and 611 did not (Cotality). It was Melbourne Cup Carnival weekend, so Melbourne's book fell 38% while every other capital held more auctions than a week earlier; total volume was 7.8% lower on the week and close to the 1,793 Cotality had scheduled. The same weekend last year, also Cup weekend, 70.0% of 2,109 auctions cleared, so volume is about 18% lower and the clearance rate 22.8 points lower.

Cotality's final figure for last weekend (25 October) was 43.6% on 1,871, 4.8 points below its preliminary 48.4% and the lowest final since late June (42.3%). October's four weekends averaged 45.2% on final figures, the softest month of 2026 so far, below June's 45.7%. On that gap, this weekend's final is likely to land in the low 40s.

City by city

Sydney cleared 53.8% on 731 auctions (275 sold, 236 not), up from a preliminary 48.2% on 631; last weekend finalised at 41.7%. A year ago Sydney cleared 70.6% on 1,106.

Melbourne cleared 49.5% on 514 (190 sold, 194 not), down from 54.8% on 831, in the third weekend of Victoria's reserve price disclosure rules. Vendors brought auctions forward ahead of the Carnival, as they did a year ago, when Melbourne held 507 auctions on Cup weekend and 66.0% cleared. Cotality expects more than 1,800 auctions across the capitals next weekend as Melbourne's book recovers.

Brisbane cleared 26.2% on 238 (34 of 130 results), up from 25.2%; it held more auctions than a year ago (218), when 77.9% cleared. Adelaide rose for a second week, to 46.5% on 144 (33 of 71), against 77.1% a year ago. Canberra fell to 38.9% on 81 (21 of 54) from 52.1%, against 62.0% a year ago. Perth sold 7 of 20 results on 24 auctions, and Tasmania 1 of 2.

My Housing Market, which counts the week to Saturday, read the national rate at 44.8% (43.4% the week before, 69.1% a year ago), with Sydney at 56.5% on 985 auctions (houses 55.8%, units 61.1%) and Melbourne at 60.0% on 574.

Prices: October on Cotality's daily index

Cotality's daily index, at its 31 October month-end values, has the five-capital aggregate 1.5% lower in October, 4.2% lower over three months and 4.6% lower over the year. Houses fell 1.7% and units 0.8%. By capital, Brisbane fell 2.0%, Perth 1.7%, Sydney 1.6%, Adelaide 1.2%, Melbourne 0.8% and Canberra 0.6%, while Darwin rose 0.6% and Hobart 0.5%. Over the year Sydney is down 9.3%, Melbourne 7.7% and Canberra 3.6%; Darwin (+10.8%), Hobart (+5.5%), Perth (+5.1%), Adelaide (+3.8%) and Brisbane (+1.6%) are still higher. Last week, to 25 October, the aggregate was about 1.2% lower for the month, so the final week added to the fall. Cotality's official October Home Value Index, including regional markets, is released on Monday 2 November.

My Housing Market's quarterly median series has the national capital-city house median down 0.3% in October to $1,206,637, with Melbourne (+0.6%) and Sydney (+0.1%) recording their first monthly rises since April, and Brisbane (-1.7%) and Adelaide (-1.0%) the weakest. Rolling-quarter medians smooth over three months of sales and can diverge from hedonic indices around turning points, so we read it as an early sign that Sydney and Melbourne's falls may be slowing.

The cash rate is 4.60%, and the next decision is at 2:30pm AEDT on Tuesday 3 November, Melbourne Cup Day, with the Statement on Monetary Policy. A rise would be the fifth of 2026, after February, March, May and September.

The CPI settled it for most forecasters

The September-quarter CPI on Wednesday showed headline inflation of 4.3% over the year, up from 4.0% in August, and a quarterly trimmed mean of 1.0%, or 3.7% over the year, up from 0.8% and 3.6% in the June quarter (ABS). Fuel accounted for most of the rise in the headline rate. After the release, all four major banks forecast a 25-point rise to 4.85%, which would be the highest cash rate since 2008, and the ASX RBA Rate Tracker put the chance of a rise at 80% at the 29 October close, up from 60% the day before the CPI.

Credit is already slowing

The RBA's September financial aggregates, released on Friday, showed housing credit growth of 0.40% for the month and 7.0% over the year. Investor credit grew 0.24%, the slowest month since January 2024, after 0.77% in June, 0.44% in July and 0.32% in August; annual investor growth has eased from 10.4% in June to 9.0%. Owner-occupier credit grew 0.46%, in line with its pace all year. Business credit, by contrast, grew 0.9% in the month and 11.3% over the year.

What it means for borrowing

On our model, which starts from the RBA's published average rates on outstanding investor loans, a 25-point rise adds about $156 a month to a $750,000 interest-only investor loan and about $125 to a principal-and-interest loan of the same size, once lenders pass it on; after the September rise the major banks moved about 10 days later. We stress-test purchases at 7.25%. Consumer confidence remains near record lows: the ANZ-Roy Morgan index was 67.9 in late October, a fourth straight week below 70 and 17.9 points below a year ago.

SQM's September print, the latest, put national vacancy at 1.4%, up from 1.3% in August and 1.2% a year ago, on 42,290 vacant rentals, 17% more than a year earlier. Melbourne and Canberra (1.9%) and Sydney (1.8%) are the loose end, while Brisbane (0.9%), Perth and Adelaide (0.6%), Darwin (0.6%) and Hobart (0.5%) remain under 1%. The October figures are due in mid-November.

Houses and units split

Over the 30 days to 12 October, national house asking rents rose 1.6% while unit rents fell 1.6%, and unit rents fell in seven of the eight capitals. In Sydney, house rents rose 2.3% to $1,159 a week and unit rents fell 1.0% to $749; Melbourne units fell 1.3% to $594 (SQM Research). Annual asking-rent growth is still positive in every capital, from 4.5% in Sydney and Adelaide to 13.9% in Darwin.

Rent cover after a November rise

Gross rent on an 80% interest-only loan covers well under the interest bill in every large capital at today's rates, and a rise to 4.85% widens the gap by a few points in each. The markets where rent does most of the work are the regional and Darwin entries on our October Top 10, where our stress test has rent covering interest at 7% for seven of the ten units and four of the ten houses. With investor credit slowing, underwrite each purchase on its rent and check that local vacancy is low enough to protect it.

The week's clearest signal was in the credit data. Investor housing credit grew 0.24% in September, the slowest month since January 2024. As recently as May and June it was growing at 0.77% a month. Owner-occupier credit has held at about 0.46% a month throughout, so the slowdown is specific to investors (RBA).

What changed in July

The turn came in July, the first full month after Parliament passed the negative gearing and capital gains tax changes on 25 and 26 June. Investor credit growth fell to 0.44% that month, then 0.32% in August and 0.24% in September, and annual growth has eased from 10.4% in June to 9.0% (RBA). The RBA's 29 September rise only touched the last days of that run. Assistant Governor Christopher Kent said on 19 October that the tax changes are "moving in the same direction as monetary policy". The credit figures fit that view, but rising rates, falling prices and weak confidence all point the same way, and the monthly data can't separate them.

Prices are following

Cotality's daily index has the five largest capitals 1.5% lower in October. Brisbane fell 2.0%, Perth 1.7%, Sydney 1.6%, Adelaide 1.2% and Melbourne 0.8%, while Darwin (+0.6%) and Hobart (+0.5%) rose. Over the year the five-capital aggregate is 4.6% lower, with Sydney down 9.3% and Melbourne 7.7%. A quarterly median series from My Housing Market has Sydney and Melbourne house medians edging up in October, the first monthly rises since April. Median series can move ahead of hedonic indices at turning points, so we read that as an early sign the falls may be slowing in the two largest cities. Cotality's official October index, including regional markets, is due on Monday.

Tuesday's decision

The September-quarter trimmed mean rose 1.0%, or 3.7% over the year, and headline inflation reached 4.3% (ABS). All four major banks now expect a rise to 4.85% on Tuesday, the highest cash rate since 2008, and the ASX Rate Tracker put the chance at 80% at the 29 October close. On our model the rise adds about $156 a month to a $750,000 interest-only investor loan once lenders pass it on. It would be the fifth rise of 2026, after February, March, May and September.

What it means for you

Fewer investors borrowing means less competition at the price points investors favour: established units, and houses under about $1 million in the outer suburbs. That is where a buyer with finance approved has the most room to negotiate, and Cotality's October chart pack put the median vendor discount at 4.4%. Resale works the other way, because the pool of investor buyers you sell into later may be thinner too, especially for established dwellings: for one contracted after 12 May 2026, rental losses will be quarantined from 1 July 2027 rather than offset against wages, so run the cash flow without the tax refund. New dwellings keep the current treatment under the enacted exemption, though the definition is still to be finalised. And test every purchase at 7.25%, which allows for Tuesday's expected rise plus one more.

What would change our view

A hold on Tuesday, or a Statement on Monetary Policy that signals one more rise is enough, would ease the rate pressure. A pickup in investor credit once the new-dwelling definition is settled would show investors coming back through new builds. Neither has happened yet.

The week ahead

Monday 2 November: Cotality's October Home Value Index, and ABS building approvals for September. Tuesday 3 November: the RBA decision at 2:30pm AEDT and the Statement on Monetary Policy. Thursday 5 November: Cotality's final clearance rates for this weekend. Saturday 7 November: Melbourne's auction book recovers after the Carnival, with more than 1,800 auctions expected across the capitals (Cotality).