That's according to the Australian Bureau of Statistics (ABS) Lending Indicators data for February 2020, which also found new loan commitments rose 0.4% and 0.5% for owner-occupiers and investors respectively, implying borrowers are borrowing less.
This also represents a 1.7% and 1.9% respective drop in new loan commitments in seasonally-adjusted terms on February 2019, according to ABS chief economist Bruce Hockman.
“February’s fall in the value of new loan commitments for housing follows considerable growth in the series from mid-2019 onwards," he said.
The ABS release also noted there was "no notable impact" from the COVID-19 virus on new lending commitments in February - before travel restrictions and restrictions on auctions and inspections took place.
The total value of new loan commitments in February for owner-occupiers was $14.15 billion, and $5.30 billion for investors in seasonally-adjusted terms.
Coronavirus won't impact data until March
Westpac senior economist Matthew Hassan said the results were softer than expected, but to expect steeper drops in March's data.
"The detail was soft across most segments and is despite both price gains and turnover still holding up reasonably well in the month," he said.
"While the starting point is a touch softer the main story is still of a likely severe decline as coronavirus effects impact in coming months."
However, Mr Hassan did point to a positive in the data - an uptick in construction loans.
"Construction-related loans bucked the wider monthly decline, posting a 1.9% rise, likely supported at the margin but post-bushfire rebuilding activity," he said.
Housing Industry Australia economist Angela Lillicrap highlighted first home buyer activity was strong and that investor lending is showing signs of improvement.
“First home buyers remained active in the market, with the largest number of loans issued to first home buyers during the month in over a decade," she said.
“Investor lending was also improving, up by 3.4% in the quarter to be 6.3% higher than the same time last year."
The news comes after experts predicted 20% to 30% price drops by the end of the year.
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