Market trends property investors need to know
It’s no secret property prices are continuing to increase with investors not only enjoying capital growth but also solid rental returns courtesy of a low vacancy rate and high rental demand.
But what’s ahead? Is this a good time to invest or is the market nearing its peak? In this article, we look at key factors affecting rental investments.
Economic factors and interest rates
August saw the Reserve Bank again cut interest rates to 3.6 per cent, and with strong global growth, combined with relatively high government debts, there will be continued pressure to keep interest rates and inflation low.
Australia’s central bank is also seeking to minimise exposure to global volatility and keep the value of the Australian dollar as high as possible, using interest rates as a factor to help with inflation.
This is welcome news for those entering the property market as well as mortgage holders. The latest interest rate cut has created greater borrowing capacity for those looking to buy while also reducing mortgage repayments and allowing households to plan ahead and develop a stable budget.
Meanwhile, there’s been a lot of talk about increasing Australia’s housing supply but as yet no real policy to assist.
What does appear to be off the table for the time being, however, are any amendments to negative gearing or capital gains tax, making property investment a sound and stable prospect for future investment.
Demand and affordability
Australia’s population is on the rise, increasing by 1.7 per cent to 27.4 million people in 2024, according to data from the Australian Bureau of Statistics.
That growth is down to a combination of net overseas migration, which accounted for an increase of 340,800 people, and natural increases (births minus deaths) which resulted in an increase of 105,200 people.
This increasing population is placing constant pressure on the market overall.
Meanwhile, social housing has fallen in recent years and more people are continuing to rent as they save for properties that are far more expensive than they were just five years ago.
All of these factors combine to make property investment a sound option for the future and that’s reflected in the data particularly when it comes to rental returns.
According to realestate.com.au, Adelaide has shown the strongest growth over the past decade with a whopping 81 per cent increase in rental return.
This is closely followed by Hobart, with an increase of 76 per cent, meaning a Hobart home that was for rent for $500 in 20015 is now worth an average of $800.
Across all capital cities, the rental return increased by an average of 57 per cent since 2015.
More homes on the way but demand still strong
And then there’s the issue of supply and demand within the rental market. As developers and government plans get under way, demand will still continue to be strong with many of the larger initiatives such as the National Housing Accord and the Affordable Housing Investment Schemes taking time to implement.
High building costs are also likely to slow construction, along with red tape and the building approval process.
Meanwhile, the rental vacancy rate remains consistently low, and again dropped across the capital cities in July.
The national average vacancy rate is currently sitting at 1.2 per cent, down from 1.3 per cent in 2024, according to the latest data from Cotality (formerly Core Logic).
Darwin and Hobart are among the tightest markets, with 0.5 per cent and 0.6 per cent vacancy rates respectively in July 2025.
The national average for a rental property in Australia is $620 per week, up 6.9 per cent on the previous year, with high demand and limited supply translating into increasing rental returns.
