Property investors are flowing into high-growth markets like Queensland and Western Australia while more are selling in slower markets such as Victoria, according to new analysis.

CoreLogic head of research Eliza Owens published a look at how investors are responding to high interest rates and changes to property taxes on Thursday, concluding that demand is still higher than the number of people looking to exit the market.

There are big differences in investor activity across the country though and there is also evidence that more first-home buyers are becoming “rentvestors” rather than owner-occupiers.

Owens explained that loans to investors have risen 18.8 per cent annually, driven by a pivot in high-growth markets such as Queensland, WA and South Australia.

“The highest growth in investment loans over the year has been concentrated in high capital growth areas, and that investment activity tracks strongly with value change,” Owens said.

“In both Victoria and Tasmania, where values have been in decline, the year-on-year uplift in investor loans was relatively small, at 5.1 per cent.”

Source: CoreLogic

Biggest markets

Victoria in particular is seeing an elevated proportion of investors attempting to exit the market by listing their properties for sale.

Of the 3800 investor properties listed for sale in October more than a quarter (29 per cent) were in Victoria.

Investor listings are up 10.6 per cent on the previous five-year average.

“In Victoria, the data supports the narrative that a relatively high level of investment dwellings are being listed for sale,” Owens said.

“Not only do investors in Victoria contend with high interest rates, but capital growth in the state is soft, and the reduced land tax threshold from the start of 2024 has increased holding costs for investors.”

Source: CoreLogic, ABS

NSW is also seeing an “elevated” number of investor listings coming to market, though the extent is not as pronounced as it has been in Victoria.

First-home buyers look to rent

Loans to investors have steadily risen as a proportion of new mortgages over the upswing in the property market over the past 18 months, with affordability hurdles constraining first-time buyers.

About $9.6 billion in loan commitments to owner-occupier, first-home buyers were recorded in September, according to Australian Bureau of Statistics (ABS) data, which is down from a high of $17 billion in 2021 before interest rates rose to decade highs.

Interestingly, Owens said first-home buyers are increasingly turning to investment loans as a way to get their foot on the property ladder.

In other words, those buyers are renting out their first property rather than living in it as workers in Australia have traditionally done.

It’s a trend called rentvesting that TND has previously explored, with first-time buyers purchasing units or apartments as investment properties, and then using their equity growth to work towards purchasing their own home.

“The stark changes in Australia’s economic environment over the past few years mean that the kinds of properties investors buy may be changing, and the kind of investors in the market may be changing too,” Owen said.

“The RBA noted a possibility that less-leveraged investors may be taking the place of more highly-indebted ones. ABS loan data also suggests the portion of first-home buyer loans for investment.”

ABS figures show that loans to first-time buyers for investment properties has been rising, though from a very small base of just 711 loans in September.

“This may be a function of some first-home buyers viewing an investment property as a more affordable entry point to the housing market,” Owen said.