Tight rental market keeps property interest high

Australian Bureau of Statistics (ABS) data showed that the number of new investor loans had risen sharply in recent years, up 64 per cent from a low point in 2023.

REA Group senior economist Angus Moore said that despite the significant increase in investors in the market, the report found that 93 per cent of investors made a profit in late 2025.

“On top of that, home prices have continued to rise, meaning that the share of investor sales recording a profit has been the highest in at least a decade,” Moore said.

“While higher interest rates may slow investor activity down in 2026, rental market conditions remain tight, vacancy rates are low, and rent prices will continue to grow, which will continue to support strong investor activity this year.”

The data showed that the strong investor performance in 2025 was driven by improving gross rental yields, which have continued to climb from a 2022 low.

The report identified suburbs where investor performance was buoyed by the combination of strong yields and a short time on the market.

Sydney

Moore said that despite Sydney being Australia’s most expensive capital, investors could still find success there.

“While yields in Sydney tend to be lower compared to other capitals, many of these suburbs have achieved strong price growth and are in high demand with renters, making them ideal for investors.”

Suburbs in Sydney’s south-west proved to be popular options for housing investments, making up six of the city’s top 10.

The Central Coast suburb of Tumbi Umbi, with a median sale price of around $1.15 million, was ranked the best in the region for investors in 2025, with an annual median value growth of 21.5 per cent and a strong 3.8 per cent yield.

Property values in North Richmond in Sydney’s outer west skyrocketed in 2025, growing by more than 30 per cent, while Austral in the south-west rounded out the top three with a 22.8 per cent jump.

In the city’s unit market, the south-west was once again the strongest-performing region, comprising the entirety of the report's top three.

With a median price of $925,000, Moorebank was the top performer, growing by 29.4 per cent while returning a 5.2 per cent rental yield.

Chipping Norton and Kingsgrove were the next-best suburbs for unit investment in 2025, with growth of 14.6 per cent and 18.8 per cent, respectively.

Melbourne

Moore said that Melbourne had emerged as a strong investor market in 2025, almost matching the more populous NSW market in investment loans.

“After a small decline in investor activity between 2023 and 2024 following land tax increases in Victoria, interest has begun to rise again,” he said.

Moore said investors searching for houses focused mainly on suburbs in the city’s north-west, with Coolaroo and Meadow Heights taking the first and third spot in the rankings, with Carrum in the inner-south rounding out the list's top three.

“Price growth in these suburbs was more than five times the annual 2.4 per cent increase seen in Melbourne houses, while the return on rent was above the city’s median of 3.5 per cent.”

For units, Melbourne’s eastern and inner-ring suburbs were the most popular for investors, with Notting Hill leading the way courtesy of its 16.2 per cent growth and 8.1 per cent yield.

With yields of more than five per cent and value growth above 9 per cent, Burwood East and Cremorne completed the city’s top three rankings.

While market activity had been softer in Melbourne compared to other capitals, Moore said the outlook was improving.

“With affordable homes, yields comparable to smaller states and solid price growth, these suburbs are in a good position to attract investors.”

Brisbane

Moore said that investors looking for houses in southeast Queensland were mostly drawn to local government areas (LGAs) outside Brisbane, namely the Gold Coast, Ipswich, and Sunshine Coast.

“Biggera Waters in the Gold Coast and North Booval and Lowood in Ipswich were the top suburbs for houses based on a combination of leasing duration, median price growth and rental yields,” he said.

“Price growth was double or almost double the rate observed in regional Queensland or Brisbane, respectively.”

Located on the Gold Coast, Biggera Waters was the highest performing suburb in south-east Queensland, growing by 34.7 per cent to a median price of $1.35 million.

Ipswich, southwest of Brisbane, proved a popular investment location, with North Booval and Lowood both benefiting from more than 20 per cent growth and exceeding a four per cent rental yield.

Comparatively, Brisbane was the king of southeast Queensland for unit investment, claiming all three top spots in the rankings.

Spring Hill, Thorneside, and Brisbane City were the strongest performers in the city’s booming property market, growing by between 22 and 34 per cent.

Perth

Moore said that Perth maintained strong investor activity in 2025, driven by robust growth fuelled by relative affordability.

“Perth has continued to lead in price growth while also ranking second only to Darwin for rental yields and Hobart for rental days on market, making it an attractive choice for investors.

Cannington, Pinjarra, and Sinagra led the way in housing investment performance, with rental yields above four per cent and price gains above those seen in the broader Perth market.

For Perth’s unit market, Leederville was the top-performing suburb, with an annual growth of 27.9 per cent, supported by just 13 days on the rental market.

Bayswater and Jolimont rounded out the top three, with both suburbs' values soaring, reaching 40.6 per cent and 47.2 per cent, respectively.

Moore said the speed of growth and activity in the Perth market had made it an ideal investment location.

“Price growth was exceptionally strong, units typically leased within a fortnight, and rental returns were high.”

“Many Perth suburbs recorded solid results over the past year, which is likely to support ongoing investor interest,” Moore concluded.