Investor lending, rising rents signal fresh housing market upswing

Australia’s housing market is showing renewed momentum as investor lending accelerates, rents pick up, and the Reserve Bank openly acknowledges it expects property prices to climb further.

New figures from the Australian Bureau of Statistics (ABS) reveal a sharp rise in loans to property investors during the June quarter, while separate data from property analytics firm Cotality shows annual rental growth has re-accelerated for the first time in more than two years.

At the same time, leaked Federal Treasury advice confirms the government has no plans to change investor tax breaks, including negative gearing and the capital gains tax (CGT) discount, signalling continued policy stability for landlords and developers.

The ABS reported the number of new investor loans rose 3.5 per cent in the June quarter, compared with a modest 0.9 per cent lift for owner-occupiers. A total of 49,065 investor loans worth $32.9 billion were approved between April and June, while the average loan size increased to $674,259.

ABS Head of Finance Statistics, Dr Mish Tan, said the rebound followed two quarters of decline.

“While annual growth slowed to 0.8 per cent from 27 per cent in June 2024, the number of new investment loans remained historically high,” she said.

Investor activity rose in most jurisdictions, with the Northern Territory (+21.1 per cent) and Western Australia (+1.4 per cent) recording the largest percentage gains.

The surge comes after three RBA rate cuts this year, in February, May and August, which have increased borrowing capacity across households.

Domain Group estimates a dual-income household earning $150,000 can now borrow about $53,700 more than six months ago, a lift of 7 per cent.

RBA makes no secret of property price hikes

RBA Governor Michele Bullock has been explicit about the expected impact of lower rates on the housing market.

“As interest rates fall, activity in the housing market picks up,” she said after the central bank’s August cut.

“We would expect property prices to rise, (as) it is one of the channels through which monetary policy works.”

Meanwhile, new figures show rents are rising again, after a 16-month slowdown. The capital city rental value index increased 3 per cent in the year to July 2025, up from 2.7 per cent in June.

Sydney and Brisbane are leading the trend, particularly in apartment markets where vacancy rates remain near record lows. Brisbane’s Carindale recorded the sharpest monthly uptick (3.1 per cent), while Sydney’s Botany rose 3 per cent.

Cotality economist Kaytlin Ezzy warned the shift could have inflationary consequences.

“Rents make up 6.6 per cent of the CPI basket,” she said.

“With both rents and construction costs trending higher, housing inflation could rise in the coming months, lowering the chance of further rate cuts.”

In a further boost for the sector, leaked Treasury advice prepared for the government’s upcoming Productivity Summit indicates investor tax breaks will remain untouched.

The document, reported by the ABC, outlines measures to accelerate housing delivery by reforming environmental approvals and cutting red tape but does not recommend changes to negative gearing or the CGT discount.

The omission appears to confirm the Albanese Government sees winding back these incentives as politically risky and economically ineffective in boosting housing supply.

This coming October, the federal government launches its long awaited First Home Guarantee (FHG), a scheme allowing first home buyers to purchase a property with only 5 per cent deposit and no penalty for lenders mortgage insurance.

This is great news for our younger Australians but it does not address the real issue of supply and demand.

For investors, the combination of cheaper borrowing, rising rents and tax certainty creates a favourable environment, while developers stand to benefit from stronger demand and efforts to fast-track project approvals.

For now, the signs are clear: Australia’s housing market is back on the upswing, powered by investors and underpinned by supportive policy settings.