Investors view Melbourne as ‘best place to buy’ despite recent selloff
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Victoria’s reputation as a challenging environment for property investors is being reassessed, as a new survey suggests Melbourne might be on the cusp of a property market revival. For the second consecutive year, Victoria has been ranked as the least favourable state for property investors, yet an increasing number are eyeing Melbourne for potential buying opportunities.
The Property Investment Professionals of Australia (PIPA) conducted a survey in August, revealing that Melbourne led the nation in investor sales, with 22.1% of respondents selling at least one property in the city over the past year. This marks an increase from 18.4% in 2024. Brisbane followed closely with 19.7%, up from 16.3%, while Perth entered the top three for the first time at 11%. Sydney, however, saw a decline in investor sales to 6.3%, down from 10.2%.
Despite its reputation as the least accommodating state for property investors due to “punitive or overly restrictive” policies, Melbourne is witnessing renewed interest. PIPA chair Lachlan Vidler explained, “The combination of rising land tax, new vacancy levies and ongoing tenancy reforms is creating a climate of uncertainty. Many investors are simply deciding it’s no longer worth the risk or cost to hold property in the state.” However, he noted that the prospect of capital growth is luring investors back.
Approximately 41% of investors now view Melbourne as the best place to buy, a significant rise from 26.3% last year. Good long-term capital growth prospects were cited by 70.3% of respondents as the top reason for this optimism, followed by good population growth (58.5%) and Melbourne’s status as a major capital city (52.1%).
The survey, now in its eleventh year, provides a comprehensive view of the national investor sentiment. It highlights a trend of investors offloading rental properties at the highest rate in four years, reshaping the market by reducing the number of homes available for tenants and increasing pressure on affordability. This year, 36% of respondents believed it was a good time to sell, up from 29% last year.
The survey also found that 16.7% of investors considered selling at least one investment property over the year to August, up from 14.1% in 2024 and 12.1% in 2023. Most of these sellers were seasoned investors, with more than half having held their property for at least five years. They cited overall debt exposure, rising compliance costs, property management fees, and minimum standards as reasons for exiting the market. The looming threat of regulatory changes, such as potential reforms to negative gearing, was also a significant concern.
PIPA’s findings underscore the fragility of investor confidence amidst potential federal reforms. Only 42% of sold properties were purchased by other investors, while the rest were absorbed by owner-occupiers (37%) and first-home buyers (25%).
Mr Vidler emphasised the severe implications for renters, stating, “Once a property leaves the rental market, it rarely returns. We’re watching the slow dismantling of Australia’s rental supply, and tenants are paying the price through rising rents and reduced availability. The private rental market is losing stock at a time when demand is surging, and policy uncertainty is only making things worse. This shift is structural, not temporary. If this trend continues, we’ll see even greater strain on the rental market, and tenants will bear the brunt.”
The reasons behind the investor exodus include shifting policy settings by various levels of government, often framed as tenant-friendly reforms, which are steadily eroding investor confidence and constraining rental housing supply. Nearly half of respondents pointed to the negative public perception of property investors, often labelled as ‘greedy’ and ‘destroyers of the housing market’ in media stories.
Government interference, such as a lack of clear communication about tenancy reforms, has also been an issue. A staggering 64% of respondents were unaware of Victoria’s new vacant residential land tax, and around 60% had only moderate or limited knowledge of changes to tenancy laws across Australia.
Mr Vidler added, “The mere suggestion of changes to negative gearing or Capital Gains Tax is enough to destabilise investor sentiment. These aren’t fringe concerns – they’re mainstream fears held by thousands of everyday Australians who provide rental housing.”
PIPA Victorian board director and buyer’s advocate Cate Bakos criticised the lack of consultation with property investors by the government. “None of this is a shock to me. We’ve eroded our rental pool, and now the government wants to step back in and provide housing, but they can’t do it quickly enough to keep up with demand in the market,” Ms Bakos said. She urged the government to understand that the task of providing rental housing has not rested with the state for the last five decades. “Now that the private market has stepped in like the government wanted, they need to consult with property investors so they can absorb shocks in the market,” she added.