Home loans fall 0.5% in October
The steam is clearly coming out of the housing market, thanks to a sharp decline in the level of investor lending.
Loans approved for investment housing were down 6.1 per cent in October, based on their value, while approvals for owner-occupied housing rose 0.4 per cent.
The total number of home loans approved in October fell by a better-than-expected 0.5 per cent, while the value of total housing finance was down two per cent in the month.
Macquarie Group head of Australian economics James McIntyre said the value of loans that's been approved to investors is now the weakest since June 2014.
"There's been a really big swing in investor participation in the market, particularly since it peaked in April this year," he said.
"In just three months it's down close to 15 per cent."
Commonwealth Bank of Australia chief economist Michael Blythe said the tighter regulations the Reserve Bank and the lending watchdog have been pursuing during the past 12 months are working.
In late 2014, the Australian Prudential Regulation Authority tightened rules for investor loans with the aim of cracking down on risky loans.
"There's the lift in lending rates to investors of course, and you're also seeing some signs of a natural slowdown coming through as well," Mr Blythe said.
However, RBC Capital Markets fixed income and currency strategist Michael Turner has warned that housing finance and credit data have been prone to large revisions in recent months.
"The new price incentive for mortgage holders to classify loans as owner occupier, not investor, are muddying the water," he said.
Mr McIntyre said current auction clearance rates and easing house price growth indicates the slowing momentum is continuing into the end of the year.
"We're (also) yet to see what impact there may have been from the additional rate hikes that were passed through in November," he said.
"So there's likely to be some further weakness on the investor front."
Mr McIntyre said a combination of weaker population growth and a mammoth supply pipeline means the housing market is likely to undergo further cooling through the course of 2016 and not bottom out until 2017.