Property investor confidence at all-time high, but experts warn of double-edged sword
Property investors accounted for 38% of all new mortgage lending in the year to June 2025, according to new analysis from Money.com.au.
That means well over a third of mortgagors are buying homes, not to live in, but to turn a profit.
An eye-catching number in its own right, but it becomes even more impressive when you take into account that just four years ago, investors made up only 24% of new loans.
“The homebuyer segment is becoming less the backbone of the market,” said Money.com.au mortgage expert Debbie Hays. “Investors are now playing a much larger role in shaping house prices, affordability, supply and even influencing housing policy.”
Hays called the increased investor activity “a double-edged sword”, as competition gets tougher for first-home buyers and owner occupiers. “It signals all-time high confidence in property... but it will inevitably push prices higher and widen the affordability gap.”
While investor activity could boost rental supply, it could also lead to higher rents. “Investors will look for higher rental yields... and that translates into higher asking prices for tenants,” said Hays.
If Westpac’s latest set of annual results is a portent of things to come, 38% could just be the beginning.
Investor loans soar at Westpac
Over the year, Westpac’s Australian housing loans (excluding RAMS) grew by 5%, with the mix of investor lending rising from 36% to 39%.
This shift was achieved primarily through new flows into variable rate mortgages, which have become increasingly attractive to investors amid a changing interest rate environment.
The bank’s commentary highlighted that “the proportion of investor lending increased over the year reflecting our targeted strategy”, underscoring management’s intent to rebalance the mortgage book and capture opportunities in the investor market.
Westpac’s strategy under chief executive Andrew Irvine (pictured) is sound – both demand and supply side factors are contributing to a structural housing under-supply in Australia, which is expected to persist, thus supporting ongoing demand for credit and property investment.
By tilting its strategy towards investors, Westpac is positioning itself to benefit from segments of the market that are likely to remain resilient and potentially deliver higher margins, especially as investor loans typically command slightly higher rates and fees compared to owner-occupier loans.
But a sound strategy for shareholders is not necessarily a sound strategy for Australian homeowners. Investors expect a return on their investment; coupled with the inflationary effects of Labor’s 5% deposit scheme, and it’s inevitable that property prices will continue to soar, making it harder for first-home buyers to manage their repayments.
Reserve Bank of Australia (RBA) governor Michele Bullock said as much last month, when she warned that renewed appetite from investors re-entering the property market could “exacerbate the cycle” if activity accelerates too quickly.
More investor participation could increase loan-to-value ratios and overall leverage. Bullock said: “That introduces vulnerabilities into the system. So that’s the concern.”
However, the situation is not yet alarming. “We don’t see it manifesting at the moment in a severe way … All we’re highlighting is that it needs to be kept an eye on because it can aggravate these cycles,” Bullock added.
Property investor advocates contend that investors help with supply, but the jury is out.
Swelling rent prices are a direct result of the ongoing shortage in rental supply, with vacancy rates hitting a record low in September, per Cotality data.
“Limited supply continues to be a major catalyst in rising rents, with the number of rental listings tracking approximately 25% below the previous five-year average nationally for this time of year,” said Cotality economist Kaytlin Ezzy.
If it’s true that surging investor share of the mortgage market is good for supply, we should expect a material improvement in rental listings going forward.
Miller calls for more affordable housing
Despite Westpac throwing its hat in the property investor ring, chief executive Anthony Miller called for more affordable housing options
“It’s really important that the entire community, government, regulators and all of us to work out how we can create an environment where it’s cost effective, it’s rational and it’s reasonable where you can build a house for $500,000 to 600,000 in Australia," Miller told investors.
In additional comments to The Australian, Miller suggested that government taxes, levies and approvals are adding a third of construction costs to Australian homes.
“Our success as a company is inextricably linked to the success of this country,” he added. "And one of the challenges for this country is to get more housing and have more Australians being able to own their own property.”
