Investor activity has re-emerged as one of the strongest forces shaping Australia’s housing cycle, with lending figures revealing that investor borrowing is climbing at almost triple the rate of owner-occupier demand.
This resurgence is far from evenly distributed—Victoria in particular has staged one of the most notable rebounds. After several years of subdued investor confidence, the state is now closing in on reclaiming its long-standing position as the nation’s second-largest investor market after New South Wales.
Several structural forces are driving this renewed momentum. Rental yields have improved significantly over the past two years, reversing a decade-long pattern of compression. Strong population growth—fuelled by both overseas migration and interstate movement—is further intensifying competition for rentals, directly lifting investor confidence. On top of that, Melbourne’s relative affordability compared with Sydney is proving especially appealing. Investors who may feel priced out of Sydney’s established suburbs are finding Melbourne’s combination of lower entry prices and competitive yields increasingly attractive.
Overlaying all of this is the expanded Home Guarantee Scheme, which is allowing more first-home buyers to enter the market with deposits as low as 5%. While the program is designed to support younger Australians, it also adds a new wave of competing buyers into the same price brackets that many investors target. This overlap is creating a powerful demand shock that some analysts suggest is equivalent to several interest-rate cuts—without any official move from the RBA.
Forward-looking projections now indicate that all major capitals are on track to set new price records by late 2026. Sydney and Melbourne, despite their affordability pressures, are expected to deliver mid-single-digit annual growth as competition intensifies. For investors, the message is clear: the landscape is becoming more crowded, and careful asset selection is more important than ever. With both investors and first-home buyers converging on similar types of properties—primarily well-located, mid-priced dwellings—the ability to identify value, anticipate rental demand, and position a portfolio strategically becomes a key advantage.
