Investor activity across Australia has surged to levels not seen in nearly a decade, with Victoria the only state lagging behind the national trend. According to PropTrack Senior Economist Angus Moore, investor loans have increased substantially over the past 18 months following a quieter period during the initial interest rate hikes.  

"We're seeing investor activity reach levels not witnessed in nearly a decade, following a period of reduced activity from mid-2022 into 2023 when the Reserve Bank began its tightening cycle," Mr Moore said.

The resurgence is being put down to extremely tight rental markets nationwide, with rental availability at critically low levels and rents growing at a significant pace. While non-investor activity has also increased, it hasn't matched the pace of investor growth.

Investors now represent a substantial portion of new lending, approaching record highs in some smaller states and reaching levels nationally not seen since 2017. This trend comes on the back of growing confidence in the property market despite challenging economic conditions.

Victoria stands as the clear outlier in this national trend, with investor participation significantly lower than other states. This has created an imbalance in the Victorian market where investor-owned properties are being sold but not replaced at the same rate. "Victoria has not experienced the same investor resurgence we're seeing elsewhere," Mr Moore said.
 

Data from the Victorian Residential Tenancies Bond Authority shows a decline in active bonds over the past year, indicating a shrinking rental pool in the state. This contraction is likely exacerbating the already limited rental availability and putting additional pressure on rents across Victoria.

Despite these pressures, Melbourne's rental growth, while rapid, remains less severe than in other capital cities. Victoria currently stands as Australia's most affordable state for renters, which paradoxically may be contributing to lower investor interest.

Recent policy changes around land tax in Victoria may also be influencing investment decisions, further deterring potential investors from entering the market.

The situation has created a unique dynamic where approximately three in ten listings in Victoria are investor-owned properties being sold, similar to Sydney but higher than other states. However, these properties are not being replaced by new investor purchases at the same rate.

Market conditions may soon shift, with potential for investors to return to the Victorian market in the coming months. The combination of falling interest rates and Melbourne's home prices now being lower than both Adelaide and Brisbane could make Victoria an attractive option for property investors.

"As interest rates continue to fall and with Melbourne home prices now lower than both Adelaide and Brisbane, we may see investors redirecting their attention back to the Victorian market in the coming months," Mr Moore said.