Investor activity reaches near-decade highs across Australia

Australian property investor activity surges to near-decade highs with 18.8% growth nationally, while Victoria lags due to land tax changes. Analysis of market trends and outlook.

Australia’s property investment landscape is experiencing its most dramatic transformation in nearly a decade, with investor participation surging to levels not witnessed since 2017. This national resurgence tells a compelling story of market recovery, yet beneath these encouraging headlines lies a complex tale of regional divergence, with Victoria emerging as the notable exception to an otherwise remarkable investment revival.

The national surge in investor activity

The investment market has roared back to life with impressive momentum. New investor loans are up a strong 18.8% nationally, far outpacing the volume of investment properties coming to market. This dramatic increase represents part of AUD 330.7 billion in new housing loans committed in 2024, which is 19.2% above the 2023 level, with growth more pronounced in the investor segment at 29.8% year-on-year.

PropTrack Senior Economist Angus Moore characterises this surge as following a period of reduced activity that began in mid-2022 when the Reserve Bank commenced its interest rate tightening cycle. The scale of recovery has positioned investors as a major force in new lending, with some smaller states approaching record highs while national levels reach their strongest position since 2017.

Remarkably, this investor resurgence has occurred despite challenging economic conditions, indicating that fundamental market drivers have overcome traditional deterrents such as elevated interest rates and economic uncertainty.

Driving forces behind the investment resurgence

Australia’s rental market conditions provide the primary catalyst for this investment boom, having reached critically tight levels across most regions. The national vacancy rate held steady at 1.2% in May 2025, after 1.3% in April 2025, representing less than half of what market analysts regard as healthy.

Property analysts generally view a vacancy rate of around 3% as healthy, as it represents a market that’s relatively well balanced between tenants and owners. Current conditions indicate severe rental scarcity, creating compelling investment propositions for those seeking reliable rental income streams.

This scarcity has driven substantial rental growth across most markets. Nationally, combined rents average $649.18, with a 0.1% monthly decline but a 4.2% annual increase, while capital city rental inflation has remained relatively high, although it has steadily moderated to around 5.5 per cent in April 2025.

The demographic pressure cannot be overlooked. Between March 2019 and March 2024, Australia’s population grew by approximately 1.8 million people, creating enormous strain on housing supply and rental availability that continues fuelling investor interest.

Victoria as the standout exception

While national trends demonstrate remarkable strength, Victoria presents a contrasting narrative that highlights the power of policy settings in shaping investment flows. The state has not experienced the investor resurgence witnessed elsewhere, creating distinctive market dynamics that separate it from the broader Australian experience.

PropTrack’s analysis reveals that Victoria’s investor participation remains notably lower than other states, resulting in a concerning market imbalance. Investment properties are being sold at considerable rates, yet these sales lack equivalent replacement through new investor purchases.

Data from the Victorian Residential Tenancies Bond Authority shows a decline in active bonds over the past year, indicating a shrinking rental pool in the state. This contraction occurs precisely when rental demand remains elevated, creating supply constraints that should theoretically attract investors.

Despite these supply pressures, Melbourne’s rental growth, while rapid, remains less severe than other capital cities. Victoria currently maintains its position as Australia’s most affordable state for renters, which paradoxically may contribute to reduced investor appeal when compared to markets offering higher rental yields.

Policy impacts shaping investment decisions

Victoria’s divergent performance stems largely from recent policy changes that have fundamentally altered the investment landscape. From 2024 as part of the Victorian Government’s COVID Debt Repayment Plan, property owners with total taxable land value equal to or above the $50,000 threshold ($25,000 for trusts) face land tax liability.

This represents a dramatic policy shift. On 1st January 2024, the land tax free threshold dropped from $300,000 to $50,000, substantially expanding the number of properties subject to land tax obligations while increasing holding costs for existing investors.

Furthermore, from the 2024 land tax year a 4% absentee owner surcharge applies (previously 2% from 2020-2023 land tax year), deterring interstate and foreign investment that previously contributed to Victoria’s property market activity.

These policy adjustments have created a competitive disadvantage for Victoria when investors evaluate opportunities across different states. Increased holding costs have prompted some existing investors to exit while deterring new entrants, contributing to the state’s unique position in the current investment cycle.

Market indicators and future outlook

Current market dynamics suggest potential shifts ahead, particularly for Victoria. The combination of falling interest rates and Melbourne’s competitive pricing position may present opportunities for renewed investor interest. Melbourne’s home prices now sit below both Adelaide and Brisbane, creating affordability advantages that could attract value-conscious investors.

The broader rental market continues showing signs of stress, with new investor loans far outpacing available investment properties nationally. This supply-demand imbalance suggests rental conditions will likely remain tight, supporting investment fundamentals across most markets.

However, sustaining current investment levels depends on several factors, including interest rate trajectories, population growth patterns, and policy stability. Victoria’s experience demonstrates how quickly policy changes can alter investment flows and market dynamics.

Regional variations in investor activity reflect local economic conditions, policy settings, and growth prospects. States like Queensland and Western Australia continue attracting notable investor interest, benefiting from both policy stability and strong economic fundamentals.

The path forward for Australian property investment

The current investor activity surge represents more than a cyclical upturn - it reflects fundamental shifts in Australia’s property investment landscape. The combination of rental market pressures, demographic changes, and varying state policies has created an environment where success increasingly depends on careful market selection and strategic timing.

Victoria’s experience provides a clear demonstration of policy influence on investment flows and market outcomes. The state’s challenge in attracting replacement investors highlights the sensitivity of investment decisions to regulatory changes and holding costs.

For Australia’s property market future, this near-decade high in investor activity signals strong underlying demand while illustrating how regional policy differences can create market fragmentation. As the nation grapples with housing affordability and rental supply challenges, the investment community’s response to these varied policy settings will likely shape market dynamics for years to come.

The implications extend beyond immediate returns to broader housing market stability and rental accessibility, making investor location preferences and activity levels a crucial component in addressing Australia’s evolving housing challenges.

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