Australian investors have been very active in the past year-and-a-half, with new investor loans close to highs not seen in nearly a decade.
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).
Tight rental markets are likely encouraging this pick up investor activity. Rental availability remains very low, and rents are still growing quickly. While the activity data is a little delayed, and so pre-dates the RBA rate cuts, lower mortgage rates may also boost investor activity.
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.
Victoria is the key exception. Investor activity not picked up to the same extent as in other states, and so investors 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.[1]
This fall is likely exacerbating limited rental availability and put pressure on rents. 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 Adelaide and Brisbane, investors may start turning their attention back to Victoria.
[1] This data gets revised up over time due to late reporting; the fall in recent data is therefore likely overstated, though by how much is hard to know.
