Victoria surges ahead as fastest-growing investor market
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Photo by Maxime Francis
Victoria is making significant strides in the Australian real estate sector, emerging as the country’s fastest-growing investor market. The state is on track to reclaim its position as Australia’s second-largest landlord market by the end of the year, driven by a remarkable surge in investor loans, high rental yields, population growth, and competitive pricing.
New data from the Australian Bureau of Statistics (ABS) highlights Victoria’s robust recovery, largely attributed to increased investor interest. Over the 12 months leading up to September, investor loans across Australia rose by 9 per cent, marking a 32.3 per cent increase from the lows of September 2023. Victoria led the charge with an impressive 13 per cent growth in annual investor loans.
Debbie Hays, a property expert at Money.com.au, commented on the shift in Victoria’s market dynamics. “The fundamentals are still there in Victoria, including improved rental yields, stronger population growth and more attractive price points in Melbourne compared with Sydney, particularly across inner and middle-ring suburbs,” she stated.
Despite this surge, Queensland maintains a marginally larger share of the investor market at 23.4 per cent, compared to Victoria’s 23.2 per cent. Hays pointed out the significance of this narrow gap: “This raises the question of whether Victoria could reclaim its position as Australia’s second-largest investor market by year’s end.”
The national landscape of investor loans is evolving rapidly, with these loans growing at three times the rate of owner-occupier loans. The annual growth rate for investor loans stands at 9 per cent, compared to just 3 per cent for owner-occupier loans. New South Wales reported an 11 per cent increase in investor loans, South Australia saw a 10 per cent rise, while Queensland recorded an 8 per cent growth.
However, the data also reveals a decline in loans for new builds, land, and construction, which fell by 3.5 per cent annually and are now 38.3 per cent below their peak in June 2021. This trend reflects the broader housing supply shortage, as Hays explained, “When borrowing for new builds continues to go backwards, itʼs a clear sign that supply isnʼt keeping up, and more buyers are being pushed to compete for existing properties.” She added, “That inevitably drives prices higher, and with it, the average debt size.ˮ
Owner-occupier loans, meanwhile, have shown signs of recovery, increasing by 3 per cent nationally in the year to September and climbing 9.3 per cent above the September 2023 lows. Queensland has been a standout performer, leading the growth with a 5 per cent increase, driven by its lifestyle appeal. The state issued 72,475 loans, surpassing the combined total of Western Australia and South Australia.
Other states experienced more modest growth in owner-occupier loans, with Western Australia being the only state to record a decline of 2 per cent. Despite the overall growth in loans, the refinancing market has reached a four-year high, driven by recent market shifts.
In the year to September, Australians refinanced 618,966 loans, surpassing new loans by 81,640. Hays noted the significant shift from two years ago, stating that in September 2021, new loans exceeded refinances by 97,502, marking a dramatic turnaround of nearly 180,000 loans.
Owner-occupiers have been at the forefront of refinancing, accounting for 70 to 75 per cent of the activity. Internal refinancing has increased by 29 per cent year-on-year, doubling the growth in external refinancing. Hays explained, “Home owners are more focused on rate reduction than investors, who can claim interest expenses as a tax deduction.” She concluded, “However, debt reshuffling remains common across both segments.”
As Victoria continues to gain momentum in the investor market, the state’s growth trajectory remains a focal point for industry experts and investors alike. With its competitive advantages and strong market fundamentals, Victoria is well-positioned to challenge Queensland for the title of Australia’s second-largest investor market.
This article was first published on Smart Property Investment, a sister-brand of Property Buzz.