The combination of strong net migration and fewer available rental listings is quickly reigniting activity in the investment property sector. Current demand mirrors the conditions that previously drove a property boom, which began to ease in late 2024. As rents increase and interest rates gradually fall, more investors are returning to the market, though renters are likely to see conditions become even tougher.
Australia’s property investment environment is being reshaped by new population patterns. Contrary to early forecasts, immigration has continued to grow throughout 2025, placing more strain on housing. At the same time, vacancy rates in major cities have dropped again, reversing the slight relief seen last year. With national vacancy rates now below 1.3% and even tighter in some regions, rental options are becoming more limited.
Higher demand and tighter supply have pushed asking rents up through early 2025. Industry analysts note that investor lending is rising more quickly than borrowing for owner-occupied homes. According to the Australian Bureau of Statistics, investor loans increased by 5.7% in the year to June. Net overseas arrivals reached almost 246,000 within the first five months of 2025, marking one of the highest starts on record.
Although interest rates are on a downward trend, access to finance remains restricted due to a 3% mortgage buffer required by regulators. This benchmark means borrowers must prove they can repay loans at considerably higher interest rates than those being offered, which continues to pose a hurdle for lower-income buyers.
The outlook indicates the rental market pressures will continue unless housing supply expands significantly or migration slows. For the time being, investors are regaining confidence driven by strong rental yields and projected price growth of around 5-6% annually through 2026. However, for many renters, the situation may worsen before improvement is seen.
