10 insights into the investment property market

In recent news, the rental boom appears to be over as affordability takes its toll; house price growth slows but will continue to rise over the year; interest cut speculation abounds; ATO ramps up landlord crackdown using rental bond data; there’s a critical need for property investors – will Gen X fill the void?; and Aussies are worried about housing costs and are ready to punish pollies.

Each month we pull together 10 insights impacting the investment property market. Read on for this month’s instalment… 

1. Rent increases slow. Data from CoreLogic’s Quarterly Rental Review showed rental growth stagnated over December 2024, with rents rising 0.4% – the smallest fourth-quarter increase in rents since 2018. Annual rental growth was 4.8% – marking the smallest annual rental increase since the 12 months to March 2021. Figures from REA Group’s Rental Report December 2024 showed the national median rent was $620 a week in December with Sydney the highest at $730, followed by Perth’s $650 and then Brisbane on $630. Adelaide at $580 continued to be more expensive to rent in than Melbourne ($570).

2. Affordability stymies rental growth. According to CoreLogic, rental affordability continues to be a significant drag on rental growth. Since the onset of COVID, rents have increased by 36.1% nationally, equivalent to a rise of $171 per week, or $8,884 per year at the median level. As of September 2024, assuming a median household income, renters were spending approximately 33% of annual pre-tax income to service the median rent – the highest proportion since CoreLogic started tracking rental affordability in 2006.

3. House price growth slows. National home prices fell by 0.17% over the month of December, according to PropTrack’s Home Price Index. However, prices remained 4.73% higher than 12 months ago. Capital city areas led the decline, falling by 0.25% over December. Regional areas were more resilient, rising by 0.03%. 

4. House prices to continue to rise. According to KPMG’s Residential Property Market Outlook, house prices across Australia are expected to rise 3.3% over the year, followed by a 6% increase in 2026. The report forecasts that unit prices will increase by 4.6% in 2025 and by 5.5% in 2026.  Propertyology predicts property booms are likely to occur in 11 of Australia’s 25 largest cities during 2025.

5. Investors doing it differently. Build-to-Rent is surging in the capital cities. Frank Knight’s Build to Rent Market Update Q4 2024 found that in 2024, Melbourne, Brisbane and Sydney were the main cities for BTR investors. Meanwhile, investors are looking to micro apartments. According to BMT, micro apartments are becoming an attractive investment proposition in high-demand urban suburbs.

6. Interest rate speculation. According to the ASX, 95% of investors are expecting a rate cut in February, while banks including ANZ, CBA and Westpac are also expecting a cut. A survey from Finder revealed close to two in five homeowners said they were struggling to pay their mortgage, while one in nine mortgage holders said they’d have to sell or apply for hardship if rates stayed the same until May. 

7. ATO keeps investors in its sights. Records of around 2.2 million landlords, tenants and property managers will be used to track down underreported income, according to the ATO. Rental bond data will be collected twice a year between 2023–24 and 2025–26 and used to identify non-compliant landlords, promote voluntary compliance and improve risk models. The ATO has also expanded its foreign resident capital gains withholding (FRCGW) rules to apply to all Australian residents who own property.

8. Gen X and the investor shortage. Research from PIPA and PICA revealed there is a critical shortage of property investors. The research showed 35,000 additional investors are needed to address the nation’s rental crisis. According to Propertyology, Gen X is winning the investment race, with nearly 40% owning at least one investment property.

9. Building bites. Australia is already 15,000 homes behind target just months into the federal government’s goal of 1.2 million new homes by 2029, reported REB. Building construction costs increased by 3.4% in 2024 – marking he largest annual rise since September 2023, according to CoreLogic’s Cordell Construction Cost Index. A white paper by InvestorKit analysed 330 regions nationwide and identified 25 metropolitan and regional areas facing critical housing shortages in 2025.

10. Snippets. According to Canstar’s Consumer Pulse Report 2024, housing costs is the top worry for Australians in 2025, and Property Update noted many are ready to punish politicians who fail to tackle the housing crisis. Victoria’s new short-stay levy (7.5%) came into effect from 1 January. The McKell Institute called on the federal government to adopt a National Portable Bond Scheme. 

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are here, contact 1800 661 662 if you have any questions.