The combination of capital gains tax changes and interest rate rises and a time of rising unemployment and falling real wages have sent the number of new housing loans in the September quarter tumbling.

Turns out to reduce house prices all you need to do is finally have a taxation system that does not treat housing as a tax minimisation scheme and also get the Reserve Bank to hike interest rates due to a massive oil price shock, while at the same time an AI boom is causing the cost of housing construction to rise.

The big headline from the latest lending indicator data released on Wednesday is that in the year to September, investor housing loans fell 38%, while the value of loans for owner-occupiers dropped 4.6%:

Click here if this graph does not display

There are a couple of things affecting this.

The impact of the changes to the capital gains tax (CGT) discount are obvious.

But also in the September quarter last year (as I wrote at the time) there was a big spike in investor loans (up 18% in the quarter) due to investors rushing in to the market before the 5% deposit guarantee for first home buyers came into effect.

Sign up for the Breaking News Australia email

The combination of that happening a year ago and the end of the CGT discount this year makes for a worse looking drop in investor loans.

We know this will lead to at the very least flat if not falling house prices over the next six months because there is a pretty close relationship between the growth of housing loans now and what the price of houses will do for the next half of a year:

Click here if this graph does not display

An 18% fall in home loans does not mean house prices will fall by that amount – looking at numbers on average over the past 20 years it would suggest no rise or fall in house prices.

However, the early evidence is of prices falling. So when the Australian Bureau of Statistics releases the next house price data in a couple of weeks, we should be starting to get a solid picture of what is happening across the nation in both the cities and regional areas.

This is clearly the changes to the CGT discount working as intended. The entire point was to reduce the number of investors buying houses and clear the field for owner-occupiers.

But of course, there has also been a fall in owner-occupiers taking out loans. That, however, is much less to do with changes to the CGT discount (after all, homeowners are not investors) and more about the rises in interest rates.

This is where the RBA’s strategy of raising interest rates in an economy where wages growth is not keeping up with inflation and unemployment is rising is being directly felt.

Were we currently experiencing strong wage and employment growth, higher interest rates would only dull the number of people trying to buy homes, not cause it to drop.

While investing in housing is based around the possible profits you could make (including after tax), buying a home is based much more on your personal financial position.

The reality is it was already incredibly tough to take out a home loan.

Click here if this graph does not display

In the past three years the average size of a home loan in Western Australia grew by 53%, while at the same time wages in the state increased just 11.6%.

Click here if this graph does not display

So for most people hoping to take out a first home loan, things were so absurd that the only possibility was the government introducing a 5% deposit guarantee, which, of course, also increased house prices.

But rate rises affect your borrowing capacity. The annual cost of repayments on an average home loan of $730,000 have now gone up $5,772. Coming up with this amount, particularly when your wages have not increased by anywhere near the same rate, while the cost of everything else continues to rise, is a significant financial ask.

At least things are calming down.

While in the past year the growth of the average home loan has slowed, the annual growth of 5.8% across the nation shows just how fast house prices were rising previously, that such a number is actually slowing:

Click here if this graph does not display

But while house prices clearly are returning to some sense of reality after six years of absurd increases, the drop in loans for construction is less welcome.

Here the impact of rates is being combined with the rising cost of construction of housing driven largely by the AI datacentre boom.

In the past year the cost of housing construction has risen well above other production costs:

Click here if this graph does not display

And while the increase is not so bad as occurred after the end of the pandemic, the AI boom and its demand for things like copper and electrical equipment has sent the prices of those soaring.

In nine months, the price of copper pipes has risen 33%, while electrical cabling is up 26%.

Click here if this graph does not display

So things are tough for home builders and homebuyers.

The good news is things should improve for buyers if the RBA finally stops trying to prevent inflation by allowing unemployment to rise. Right now investors believe the next move is a rate cut, with a possible two in the next 18 months:

Click here if this graph does not display

Of course, that will only happen because unemployment will have risen high enough for even the RBA to worry about. So the better news for borrowers may mean worse news for workers.

• Greg Jericho is a Guardian columnist and chief economist at the Australia Institute