Rate cut back on the table, investors back in the game
With interest rates again tipped to fall next month and investor lending at its highest since 2017, property buyers are surging back into the market — but it’s where they’re buying that might surprise you.
Investors are pouring back into property, and the latest unemployment figures could trigger another interest rate cut that would only serve to entice even more buyers into an already heated real estate market.
If interest rate speculation was a sport, the current game would be a cliffhanger.
In the space of a few months, the big four banks and economists around the country have gone from tipping two rate cuts in the latter part of 2025, to ruling them out completely when inflation surprised on the upside a few weeks ago, to being widely anticipated again as the jobless queue lengthened.
The Reserve Bank of Australia faces a tough call when it announces its next monetary policy moves on 4 November, having kept them on hold in late September.
That Melbourne Cup Day announcement is now heavily tipped to be a 0.25 per cent cut, bringing the official cash rate to 3.35 per cent.
The reason for the big swing back towards expectations of a rate cut was the latest ABS data showing unemployment had jumped to a four-year high of 4.5 per cent.
The new data contradicts the Reserve Bank’s recent assessment that the labour market remained tight and was fuelling inflation.
As a result, financial markets have swung from rating the chances of a November rate cut at less than 40 per cent to a 66 per cent chance.
The RBA has, however, stuck to its guns in arguing that a return to rising inflation remains a significant threat that would only be further fuelled by rate cuts.
The central bank’s chief economist and Assistant Governor, Sarah Hunter, gave a speech in Sydney this week saying inflation in the September quarter would be stronger than the RBA had previously factored in.
Average wage growth over the past two years has been 4.1 per cent, but Ms Hunter said the economy could only sustain a 3.2 per cent a year lift before inflation took a serious turn for the worse.
Property investors leaping into market
Amidst this economic jostling between wages, jobs and inflation, property investors benefiting from lower borrowing rates in 2025 have piled back into the market.
According to the newly released PropTrack Terri Scheer Investor Report, investors now make up their highest share of lending since 2017.
Investor activity picked up across most of the country in the past year, and with markets again expecting an imminent interest rate cut, combined with an environment of tight rental market conditions, strong investor activity is likely to be supported over the year ahead.
REA Group Senior Economist, Angus Moore, said the number of new investor loans has risen solidly in the past two years, after a quieter period when the RBA started raising rates.
“This means investors are now making up a substantial share of new lending.
“Rental market conditions remain very tight, and rents have grown rapidly in recent years, which is encouraging investors to buy.
“With markets expecting at least one further rate cut by the Reserve Bank and challenging rental market conditions persisting, strong investor activity is likely to continue over the rest of this year and next,” Mr Moore said.
Terri Scheer Executive Manager, Carolyn Parrella, said resale profitability was attractive to investors.
“With more than 90 per cent of investment properties selling for more than their purchase price – a near record level - the current market conditions could present a lucrative opportunity for property investors.”
Where are property investors buying?
The report also found that all age brackets are buying investment properties.
Seven in ten Australian households that own an investment property are aged between 35 and 64, meaning this age group is overrepresented. The share of property investors aged over 60 years old has also risen, up from 14 per cent in the early 2000s to 27 per cent today.
The vast majority still stop at one investment.
Among Australian households that do invest in property, it’s most common to have one (67.6 per cent) or two (20.4 per cent) properties.
It’s the inner city suburbs that most investors are turning to.
It’s a trend most prominent in Melbourne but that strong demand is seen around the country, as those areas have large rental markets with a significant number of prospective tenants.
New housing developments have also lured investors into more affordable markets.
The investor report found that areas like Wyndham Vale, Tullamarine and Melton in Melbourne’s west, Blacktown and St Marys in Sydney’s west, Ipswich in Brisbane’s west, Kwinana in Perth’s southwest and Armadale in its southeast, are all seeing a high degree of new investor purchases.
