Investor lending surges to record highs as cheaper finance fuels demand

Australia’s housing finance market is surging again, with new figures showing investor lending has climbed to record highs amid cheaper borrowing costs and a renewed appetite for housing.

The latest Australian Bureau of Statistics (ABS) Lending Indicators data shows the number of new investment loans rose 13.6 per cent in the September quarter to 57,624 – the highest level since March 2022. The total value of these loans reached $39.8 billion, up 17.6 per cent over the quarter.

Dr Mish Tan, Head of Finance Statistics, ABS, said both the number and value of new investment loans had reached all-time highs.

“Falling borrowing costs and low vacancy rates are favourable conditions for investors,” Dr Tan said.

“The strength of lending for investment also pushed the total value of all new dwelling loans to a record high in September.”

The average investor loan size rose by nearly $12,000 to $685,634, with investment lending now accounting for about 40 per cent of all new housing loans.

Investors also typically supply around a third of all new homes built in Australia but are a larger share of the market at present due to a lower level of activity from owner-occupiers.

Growth was recorded across every state and territory, led by New South Wales (up 19 per cent), Victoria (18.5 per cent), and the ACT (27.8 per cent). Queensland, Western Australia, South Australia, Tasmania and the Northern Territory all posted single-digit quarterly gains.

Owner-occupier and first home buyer activity rises

Owner-occupier loans also rose modestly, up 2 per cent to 83,846 approvals, while the total value climbed 4.7 per cent to $58.2 billion.

The average owner-occupier loan size increased to $693,801, highlighting the growing borrowing power of upgraders and downsizers in established markets.

First home buyers also made a slight return, with loan approvals rising 2.3 per cent to 29,637. The average first home loan reached $560,249, up more than $5,500 over the quarter.

Investor activity drives lending momentum

Oxford Economics Australia’s Senior Economist, Maree Kilroy, said investor lending was driving the overall rebound in housing finance.

“Investor lending accelerated 17.6 per cent in the September quarter to reach a new record of $39.8 billion,” Ms Kilroy said.

“Both the volume of investors taking out new loans and the average loan size reached new highs. The average investor loan now sits at $686,000, just below the $694,000 average for owner-occupiers.”

She added that owner-occupier lending growth was being led by upgraders and downsizers, with demand from first home buyers expected to rise sharply in the December quarter following the rollout of the expanded 5 per cent Deposit Scheme last month.

“Housing demand is responding forcefully to the cumulative 75 basis points of interest rate cuts since February, alongside generous first home buyer policies and limited advertised stock,” Ms Kilroy said.

“While another rate cut looks less likely in the near term after the RBA’s hawkish tone, price momentum is expected to continue. We anticipate the national median home price will end 2025 up at least 8 per cent.”

Victorian investment leads the way

Analysis from OurTop10 of ABS lending data reveals Victoria has emerged as Australia's leader in investor loan growth, with annual growth surging from 9 per cent to 13 per cent in the September 2025 quarter, while the national average declined from 12.3 per cent to 9 per cent.

The shift is remarkable for a state traditionally oriented toward owner-occupiers. Victoria accounts for 29 per cent of all national owner-occupier loans but only 23 per cent of investor loans, yet it's now outpacing all major states in investor activity.

Investor loans for existing dwellings in Victoria surged 19 per cent, from 30,673 to 36,363 loans year-on-year. The preference, however, is strongly towards existing dwellings; demand for construction loans for investment fell 2 per cent, and new building loans dropped 3 per cent.

Despite the surge, Victoria's investor loan market remains 10 per cent below its June 2022 peak of 53,254 loans, representing 5,522 fewer loans.

Nationally, investor loans have reached record highs, with New South Wales and South Australia both already past their previous peaks, while Queensland sits 2 per cent below and Western Australia 3 per cent below their respective peaks.

Simon Ma, CEO of OurTop10, Victoria presents a compelling opportunity for property investors.

“Victoria's lower property prices are clearly attractive, as shown by the falling average loan size while other states are rising.

“Combined with strong rental demand, 19 per cent growth in existing dwelling loans, and significant room to grow before reaching previous peaks, Victoria's market dynamics are ideal for investors seeking their next opportunity.”