10 insights into the investment property market

Dominating news is the RBA’s decision to hike the cash rate, and that adds another layer to trends and predictions for the year unfolding – growth in house and unit prices slows; rents are still on the rise; investors stay busy and Victoria’s devastating bushfires flame fears on insurability.

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

1. RBA lifts cash rate. Australia was holding its breath on 3 February and exhaled with a groan when the RBA lifted the cash rate by 25 points to 3.85%. It was reported as a ‘shock hike’ but in fact, widely tipped by financial markets (70%). It was the first rise in two years. Noting the pick-up in inflation in the second half of last year. The RBA said “growth in private demand had strengthened substantially more than expected…” and “activity and prices in the housing market are also continuing to pick up.”  The ABS reports housing was the largest contributor to inflation over the past 12 months. Banks are traditionally faster to pass on rate rises than rate cuts and are likely to respond in the next weeks or months with adjustments to mortgage rates.
2. A vicious real estate circle. Economists often refer to the cash rate as a ‘blunt instrument’ and, in expectation of the rate increase, Housing Industry Association (HIA) Chief Economist Tim Reardon told ABC Mornings Perth he did not think it would hit the mark in terms of cooling inflation – in fact it could do quite the opposite.  “If you raise interest rates it makes it increasingly expensive to build more homes and so that will further restrict supply and further add house price pressures and rental price pressures,” he said.
3. It is still a landlord’s market. Landlords will feel the pressure of mortgage rate increases along with other homeowners and may already have been rethinking strategy for 2026, but it is still considered a landlord’s market. National rent prices reached a new record high in the December quarter according to Realestate.com’s latest Market Insight with renters now paying an extra $1,560 on average, compared with a year ago. Sydney remains the most expensive city ($760pw median) and Perth is not far behind ($700). Hobart is the least expensive, but not my much – just a couple of dollars less than Melbourne which may well become the most affordable city to rent this year.
4. House prices up – but growth slowing. The national capital city median house price continued to head north in January, though only marginally (0.1%) reaching $1,279,800 in January. National unit prices fell by 0.2% to $712,550 but still 8.4% higher than the same time last year. Noting the property market is usually slower in January, the PropTrack Home Price Index, showed national growth of just 0.2% while the combined capital cities recorded growth was just 0.1%. The growth in Sydney was modest (0.1), Darwin remained the same and the market in Melbourne (-0.1), Hobart (-0.4) and the ACT (-0.1), softened.
5. Expectations stay positive. Despite the vexing issues of labour shortages and productivity, the HIA reports there has been a 10.1% increase in house building approvals in the last three months compared to two years ago, and a 36.4% increase in multi-unit approvals over the same period.
6. Housing stock down, competition intense: According to Cotality, the number of homes advertised for sale is “down 19% compared to the same time last year, and 25% below the five-year average. At the same time, the rolling quarterly number of home sales was estimated to be 2.7% higher than a year ago, and only 1.8% below the five-year average. It’s homes at the lower end of the market supporting growth, according to the Cotality analysts, especially for houses and there’s ongoing, intense competition for those more affordable houses.
7. Investor lending strong – but for how long? Stable interest rates are credited as one of the drivers of an increase in investor lending activity in the December quarter. Whether other drivers identified by Property Finance Invest – tight rental markets, limited new-build lending and construction activity, and renewed investor confidence and momentum – will outweigh the impact of February’s RBA rate hike is yet to be seen. Before the rate rise, it reported “Australia’s housing finance landscape entering 2026 is showing renewed strength, with a clear rebound in dwelling-loan commitments and investor lending emerging as the strongest driver of activity”.
8. What could go wrong? Notwithstanding the RBA’s sobering news, the outlook remains generally positive, so where is the risk for investors this year? Domain's Forecast Report 2026 projects record levels for prices and rents, but also identifies four key risks – persistent inflation which could delay rate cuts and slow buyer demand; labour and material constraints impacting construction and maintaining pressure on prices and rents; affordability ceilings (buyers reaching their limits) which could slow demand; and investors returning aggressively to value segments, increasing competition for affordable homes and units.
9. Catastrophic fires – impact on insurance. Insured losses as a result of the devastating January bushfires in Victoria have climbed higher than $200m across more than 3,000 claims, according to the Insurance Council of Australia (ICA). And while ICA’ director of mitigation and extreme weather, Liam Walter told ABC News “premiums didn’t usually rise automatically after a single event, a combination of costly disasters could impact prices.”
10. Fake landlords. Scammers posing as landlords in online marketplaces and social media platforms prompted a January warning from the WA Government. A total of $51,875 was stolen from 20 victims last year, which surpasses the 16 victims and $39,935 in losses reported in 2024. Typically, the scammers pretend to be private landlords who lure their victims with low rent prices and stolen photos of real properties.