New investor lending is close to its highest share of the home loan market since 2017, a new report has found.
The annual PropTrack Terri Scheer Investor Report found falling mortgage rates and tight rental market conditions had played a part in increased investor activity.
Low rental vacancy rates have fuelled rapid growth in rents, in turn increasing gross rental yields.
At the same time, rapid home price growth, particularly in Adelaide, Brisbane, and Perth, has led to the vast majority of investor sales being profitable.
Profitable sales near record
More than 90% of investment properties sold in the past year fetched prices more than they were bought for - around the highest share on record.
Even in Sydney and Melbourne, where price growth has been slower, the vast majority of investor sales saw profitable outcomes.
The figure was around 90% in Sydney and just over 80% in Melbourne, the lowest of the capital cities.
Conversely, almost all investors selling in the smaller capitals - Brisbane, Adelaide, and Perth - achieved profitable sales.
Where are investors buying?
The report found inner-city Sydney and Melbourne and more affordable regions are the most popular with investors.
More affordable outer suburbs and satellite hubs to major cities are also seeing a high volume of investor purchases.
These include areas such as Wyndham, Tullamarine, and Melton in Melbourne's west; Blacktown and St Mary's in Sydney's west; Ipswich in Brisbane's west, Kwinana in Perth's southwest and Armadale in its southeast.
Many of these areas are where new housing development is concentrated, the report found.
The tables below shows the top three investor suburbs in each region for both houses and units:
Sydney - houses
| Location | Region | Median sale price | Annual median growth (%) | Rental yield |
| Tumbi Umbi | Central Coast | $1.1 m | 16.4% | 3.6% |
| Werrington | Sydney - Outer West & Blue Mountains | $1.044 m | 14.1% | 3.8% |
| Austral | Sydney - South West | $1.07 m | 14.4% | 3.9% |
Sydney - units
| Lakemba | Sydney - Inner South West | $480,000 | 9.1% | 5.7% |
| Bankstown | Sydney - Inner South West | $579,000 | 9.2% | 5.5% |
| Enfield | Sydney - Inner South West | $750,000 | 15.4% | 5.1% |
Melbourne - houses
| Cranbourne South | Melbourne - South East | $800,000 | 9.5% | 4.3% |
| Meadow Heights | Melbourne - North West | $638,000 | 10.0% | 4.5% |
| Coolaroo | Melbourne - North West | $602,000 | 11.4% | 4.3% |
Melbourne - units
| Notting Hill | Melbourne - South East | $384,000 | 10.9% | 6.9% |
| Sunshine | Melbourne - West | $516,000 | 12.2% | 6.0% |
| Broadmeadows | Melbourne - North West | $465,000 | 11.8% | 5.7% |
Brisbane - houses
| North Booval | Ipswich | $650,000 | 28.7% | 4.4% |
| East Ipswich | Ipswich | $649,500 | 25.9% | 4.3% |
| Kilcoy | Moreton Bay - North | $630,000 | 18.9% | 5.0% |
Brisbane - units
| Beenleigh | Logan - Beaudesert | $500,000 | 30.5% | 4.8% |
| Slacks Creek | Logan-Beaudesert | $515,000 | 26.7% | 4.9% |
| Woodridge | Logan - Beaudesert | $431,000 | 19.7% | 5.0% |
Adelaide - houses
| Evanston Gardens | Adelaide - North | $640,000 | 23.4% | 4.6% |
| Elizabeth North | Adelaide - North | $505,000 | 19.0% | 4.8% |
| Evanston | Adelaide - North | $614,000 | 21.5% | 4.6% |
Adelaide - units
| Brooklyn Park | Adelaide - West | $455,000 | 27.1% | 5.0% |
| Camden Park | Adelaide - West | $618,000 | 39.8% | 4.5% |
| Morphett Vale | Adelaide - South | $578,000 | 22.7% | 4.5% |
Perth
| Midvale | Perth - North East | $655,000 | 23.6% | 5.5% |
| Cannington | Perth - South East | $725,000 | 24.5% | 5.2% |
| Stratton | Perth - North East | $608,000 | 21.1% | 5.3% |
Perth - units
| East Cannington | Perth - South East | $560,000 | 40.0% | 6.5% |
| Hamilton Hill | Perth - South West | $570,000 | 41.8% | 5.8% |
| Cloverdale | Perth - South East | $525,000 | 26.5% | 6.6% |
Canberra - houses
| Isabella Plains | ACT | $840,000 | 5.8% | 4.2% |
| Calwell | ACT | $845,000 | 5.0% | 4.3% |
| Casey | ACT | $934,000 | 13.8% | 4.2% |
Canberra - units
| City | ACT | $547,000 | 11.7% | 5.9% |
| Harrison | ACT | $585,000 | 3.8% | 5.7% |
| Braddon | ACT | $615,000 | 7.9% | 5.6% |
Who is buying investment property?
The report found about one in seven Australians own a rental property, with most households owning one or two properties.
Around two-thirds of investors own a single investment property, with around 20% owning two.
In recent years, the share of households investing in a rental property has plateaued although investing in housing in Australia remains high compared to global standards.
Unsurprisingly perhaps, investors are more likely to be in high income households and aged between 35-64.
Younger property investors on the slide
The report found owners of investment properties have gotten older over the past two decades, coupled with a decline in the share of investors aged under 40.
Twenty-five years ago, those under 40 were once the largest age group among investors but are now the smallest group today.
The share of investors that are first home buyers - often referred to as rentvesters - has been steadily falling after peaking during the pandemic.
First-home buyers make up around 4-5% of investor purchases while rentvesting is a little more common in New South Wales than in other states.
This has been linked to affordability challenges in the state.
Investor activity expected to remain strong
The report forecasts conditions are likely to remain favourable for investors in the near term following Reserve Bank cash rate cuts in February, May, and August.
Although rent growth has been more modest compared to its peak periods post-pandemic, rents are still growing solidly.
This is driven by rental markets that remain tight and elevated competition among tenants.
With at least one further rate cut expected this downcycle and ongoing tight rental market conditions, the report predicts investor engagement in the residential market is likely to remain high.
The latest lending data from the ABS confirms investors accounted for more than 38% of new home loans in the June quarter, with their market share a good chance of being bolstered on the back of another interest rate cut in August.
Monthly investment housing credit growth is also at the strongest level in about a decade.
The last time credit growth was this hot for investors, APRA put lending limits on the sector.
Advertisement
Buying an investment property or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for investors.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.24% p.a. | 6.28% p.a. | $3,075 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
6.04% p.a. | 5.95% p.a. | $3,011 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
6.14% p.a. | 6.16% p.a. | $3,043 | Principal & Interest | Variable | $0 | $350 | 60% |
