Back in the game

Residential property investors accounted for 23% of all property purchases in early 2025, climbing from a cycle low of 20%.
That might sound like a modest increase, but in property terms, when investors move, markets generally follow. So, while first-home buyers still dominate the headlines, other movers and shakers are quietly stepping in.

What’s driving activity?
Lower mortgage rates change the math. When borrowing costs drop, rental yield calculations start looking a bit healthier. Gross rental yields have climbed to 3.9%—the highest since early 2016—making the numbers work for investors who’ve been sitting on the sidelines.

Regulations have also swung back in investors’ favour. Remember the dark days of interest deductibility removal? These policies have largely reversed:

• Mortgage interest deductibility: Restored to 80% and rising
• LVR requirements: Relaxed for investors
• Bright-line test: Reduced from 10 years to 2 years

Smart investors recognise opportunity when they see it
Property values are still 17–25% below their 2021 peaks in major centres—and it looks like they’re still falling, at least over the last four months. REINZ’s House Price Index for June shows prices nationwide dropped by 0.8%. This follows declines in May (0.4%), April (0.3%), and March (0.6%). So, there are plenty of bargains. Meanwhile, competition from first-home buyers is cooling.

New builds remain the golden child of investor purchases, offering:
• DTI exemptions: New builds escape debt-to-income ratio restrictions
• Depreciation benefits: Fresh assets offer stronger deductibility claims
• Lower maintenance: Everything’s under warranty
• Tenant appeal: Modern amenities command premium rents

Many investors in our networks are using current conditions to trade up within their portfolios, putting a greater focus on cash-flow-positive properties rather than speculative growth plays.

They’re also gravitating toward suburbs and regions with stronger rental yields, more affordable housing stock where rent-to-price ratios work, properties under $800k where financing remains accessible, and areas with infrastructure development signalling future upside.

It’s not all smooth sailing
Several headwinds are worth watching:
Debt-to-income ratio restrictions are starting to bite—particularly for highly leveraged investors looking to expand their portfolios, and lower-income investors who have relied on equity gains for growth. This is why new builds (DTI exempt) are gaining popularity among investors.

• Interest rates: While rates have fallen, they’re still well above the ultra-low levels that fuelled the last property boom.
• Political risk: Future government attitudes toward property investment remain uncertain. The next general election is 18 months away. The latest political poll shows coalition parties reasserting their lead, but anything can happen. Centre-left governments tend to target landlords.
• Policy changes: Higher construction costs and consent delays mean new supply is constrained—great for rental demand but tough on long-term affordability. This could trigger policy responses. Also consider the risk of an inflation surge (leading to higher interest rates), or continued job losses impacting rental demand.
• Migration: If people keep leaving, finding good tenants will get tougher. Migrant arrivals are down 26% this year, and the country’s net loss to Australia was 30,000 last year.

What now?
The consensus view: investor activity will continue growing through 2025, but at a measured pace. Current conditions offer a rare combination:

• Reasonable entry prices (still below previous peaks)
• Improving financing conditions (falling rates, restored deductibility)
• Strong fundamentals (constrained supply)
• Regulatory stability (policy settings unlikely to worsen)

Modern property investment requires cash flow over speculative growth, diversification, a long-term view, and professional management to maximise returns and minimise hassles. Call 0800 GOODWINS to put your property investments into safe hands.