Australia’s property market is experiencing a resurgence in investor activity. However, one state is bucking the trend: Victoria. While investors are flocking to markets like Queensland and New South Wales, Victoria is witnessing a notable decline in investor interest. Let’s delve into the dynamics shaping this landscape.

🔥 National Surge in Investor Activity

Investor lending has seen a significant uptick across Australia. According to the Australian Bureau of Statistics, the value of investor loans increased by 22% annually in 2024, outpacing the 6% growth in owner-occupier loans. This surge is driven by factors such as tight rental markets, expectations of higher rental yields, and greater borrowing capacity for investors. Australian Bureau of Statistics

States like Queensland and Western Australia have become hotspots for investors. Queensland, for instance, has overtaken Victoria as the second-largest property investment market, with investor loan numbers growing by 24% annually.

🧊 Victoria: The Outlier

Contrary to the national trend, Victoria is experiencing a decline in investor activity. Several factors contribute to this downturn:

• Increased Taxes: Victoria has implemented higher property taxes, including a reduced land tax threshold and a 7.5% levy on short-stay accommodations like Airbnb.
• Stricter Regulations: Over 130 rental law changes since 2019 have added to the complexity and cost of property investment in the state. heraldsun+1The Guardian+1
• Investor Exodus: Data indicates a significant sell-off by investors, with over 24,000 rental properties lost in a year. Active rental bonds in Victoria dropped from 677,492 in September 2023 to 652,766 by September 2024. heraldsunBarry Plant+1heraldsun+1

🏘️ Impact on the Rental Market

The decline in investor activity has led to a contraction in Victoria’s rental market. The number of active rental bonds—a proxy for rental properties—has decreased significantly. This reduction exacerbates the existing rental crisis, with vacancy rates in Melbourne at just 2% and rent affordability at its lowest in over a decade. Barry PlantThe Guardian

💡 Opportunities Amidst Challenges

Despite the current challenges, Victoria’s property market may present opportunities for savvy investors:

• Affordability: Melbourne remains Australia’s most affordable capital city for renters, which could attract tenants and stabilize rental income.
• Potential for Growth: With property prices in Melbourne lower than in cities like Brisbane and Adelaide, there may be potential for capital growth as the market stabilizes.
• Policy Reforms: If the Victorian government addresses investor concerns through policy adjustments, it could rejuvenate the investment landscape.