Australia’s property market is defying expectations with demand for investment loans, new property loans and refinancing continuing to rise, even with supply shortages and rising property prices presenting significant challenges.
The resilience of the market highlights the shifting dynamics within the housing sector as investors, homeowners and first home buyers navigate these conditions.
Investor loans outpacing owner occupiers
Investment loans have emerged as the fastest growing segment of the mortgage market. In 2024, investor loans surged by 22%, more than three times the growth rate of owner occupier loans, increasing by just 6% year on year.
This trend reflects a growing appetite for property investment driven by several key factors:
- Low vacancy rates
With rental demand at record highs across capital cities and no signs of easing, investors are capitalising on rising rental yields. - Population growth
Australia’s growing population is intensifying housing demand making property investment an attractive long term strategy. - Equity gains
Rising house prices have boosted equity for existing homeowners enabling them to expand their portfolios.
According to property experts, these conditions are likely to drive even greater investor activity in 2025 based on the assumption of market conditions shifting into a downward rate cycle.
Refinancing makes a comeback
Refinancing activity has also picked up significantly after a slowdown in previous years. Internal refinancing rose by 15% in the final quarter of 2024 compared to the same period in 2023.
The recent rate cut by the Reserve Bank of Australia (RBA) has provided much needed relief for borrowers. With further rate cuts anticipated in 2025, refinancing activity is expected to remain strong as Australians look for better deals and improved borrowing capacity.
First home buyers finding opportunities
While investors dominate the market, first home buyers are also stepping up. Loans to first home buyers increased by 6% in 2024.
This should continue to be supported by factors such as:
- Rate cuts
The RBA’s February 2025 rate cut – the first in four years – has boosted borrowing power for many Australians. - Parental support
The ‘Bank of Mum and Dad’ is playing a larger role than ever, with parents leveraging their home equity to assist with deposits or act as guarantors.
However, rising property prices remain a challenge for this group. Fear of missing out (FOMO) is driving many first home buyers to act quickly before prices climb further.
Regional trends shaping the market
Victoria continues to lead in owner occupier loan growth with a 10% increase in 2024. The state’s relatively steady property prices have made it one of the most affordable markets in Australia.
Meanwhile, Queensland has overtaken Victoria as the nation’s second largest investor market accounting for 23.8% of all investor loans in 2024. This shift reflects Queensland’s strong population growth and increasing rental demand.
The Northern Territory also saw notable growth in investor activity with a 40% year on year increase in investor loans – the highest percentage increase across the country.
Challenges ahead
Despite these positive trends, challenges persist.
- Housing supply shortages remain a critical issue with delays in zoning approvals and construction bottlenecks exacerbating price pressures.
- Stretched affordability continues to limit options for many buyers, particularly those looking for standalone homes in major cities.
Additionally, while rate cuts are expected to boost borrowing capacity further in 2025, financial uncertainty and concerns about job security could temper buyer confidence.
Looking forward
The Australian property market is entering an intriguing phase. Investors are clearly leading the charge, but opportunities still exist for owner occupiers and first home buyers willing to adapt to changing conditions.
With further rate cuts on the horizon and ongoing shifts in regional markets, now may be an opportune time for borrowers to reassess their options.
Whether you’re looking to invest, refinance or purchase your first home, navigating this complex landscape requires careful planning and experienced advice.
Contact the office
For those ready to take advantage of current trends or prepare for what lies ahead, now is the time to act before competition intensifies further. Reach out to our team.