Investors flocking back to property market, especially in one state while shunning another

As Australia’s property market gathers another burst of price momentum, it is the investors who are returning in the greatest numbers.

Nationally, new investor loans are close to highs not seen in nearly a decade.

Falling interest rates and tight rental markets have provided the motivation for investors, with the number of new loans going to investors has risen solidly in the past 18 months or so, following a quieter period from mid-2022 and into 2023 (after the RBA started raising rates).

Angus Moore, Executive Manager - Economics, for PropTrack, activity from non-investors has picked up too, but not to the same extent.

“What this means is, investors are making up a very substantial share of new lending – close to as high as we’ve seen in a couple decades in some of the smaller states, and nationally about the highest since 2017.”

The glaring exception is Victoria, where investors are still in a selling mood.

Mr Moore said investors there remain a smaller share of new buyers than is the case in other states.

“Investor sales are also a relatively high share of seller activity in Victoria at the moment, making up around three in ten listings – similar to Sydney, but higher than in other states.

“The effect of fewer investor buyers and relatively high investor sales in Victoria is that the number of reported rental properties looks to be falling.”

Data from the Victorian Residential Tenancies Bond Authority shows that the number of active bonds – a rough proxy for the number of occupied rental properties – has fallen in the past year.

“This fall is likely exacerbating limited rental availability and put pressure on rents,” Mr Moore said.

“That said, while Melbourne rents have been growing quickly, that growth is still not as strong as in other states, making Victoria Australia’s most affordable state for renters.

“That slower rent growth relative to other states may be part of the reason why investors haven’t been as interested in Victoria; policy changes around land tax may also be playing a role.

“But as rates fall, and with Melbourne home prices now lower than Perth, Adelaide and Brisbane, investors may start turning their attention back to Victoria.”

For now, however, they are mostly turning their attention to South East Queensland.

New lending data from Westpac reveals that nearly a quarter of investment properties in Queensland are being purchased by residents of NSW.

James Hutton, Managing Director Mortgages, Westpac, said that with infrastructure projects booming and population growth on the rise, Queensland is proving to be more than just a holiday destination — it’s a serious investment hotspot.

“NSW investors are making their move on the Queensland property market,” Mr Hutton said.

“It’s a strategic move for savvy New South Wales investors; Queensland offers strong rental yields and relative affordability — fuelling a consistent flow of New South Wales residents purchasing investment properties in the state over the past two years,” he said.

NSW investors are also showing a strong preference for regional Queensland, with Mackay and Gladstone leading the charge, followed closely by Ipswich, west of Brisbane.

“The popularity of regional centres like Mackay and Gladstone reflects their affordability and strong rental yields — averaging 5.6 per cent for houses and 6.9 per cent for apartments across both cities,” Mr Hutton said.

The love, however, is not being reciprocated.

Just one per cent of NSW investment properties are being bought by Queenslanders, with nearly 20 per cent of that activity concentrated in the beachside suburb of Bondi.

API Magazine’s own property sentiment survey for Q1 2025 found that Queensland had reinforced its position as being seen as the state with the best property investment prospects for the next 12 months.

Queensland attracted the nod from 35 per cent of respondents, compared to 19 per cent for second-placed Victoria.

Generational property market shift

Remarkably, over 50 per cent of property investment purchases in the past year were made by millennials and Gen Z, according to Commonwealth Bank data.

Many of those buyers were rentvestors, who purchase an investment property in an affordable area while continuing to rent in their preferred location.

But Nerida Conisbee, Chief Economist, Ray White Group, said only 55 per cent of millennials aged between 25-39 own their home, compared to 70 per cent of baby boomers at the same age in 1991 and 65 per cent of Gen X in 2006.

“This dramatic shift reflects more than just affordability challenges - it represents a fundamental change in how young Australians must approach home ownership.

“While outright ownership has remained relatively stable across generations, the proportion of young people with mortgages has declined significantly.”

More telling is the rise in rental accommodation among millennials, with over 40 per cent renting compared to around 30 per cent for previous generations at the same age.

“This shift indicates that many young Australians are either unable to secure mortgage finance or are choosing to delay home ownership due to market conditions.”

The ACT budget released Tuesday (24 June) recognised the issues facing home buyers. The territory’s government  will now offer increased stamp duty concessions to eligible home buyers up to a purchase price of $1.02 million as of 1 July 2025.

The ACT government said that the new threshold will make it easier for Canberra residents to find a home that suits their needs and support the development of dual occupancy properties across Canberra.