Housing debates often revolve around either the affordability crisis, or property as an investment. With the two often interlinked. We have spoken about Melbourne home price underperformance but the housing debate is a national issue.
In any such discussion it is all too common that what really counts is forgotten – there is simply not enough available accommodation where people want to live.
We need more houses in the right location. Over 50% of Australia’s population lives in the 3 cities Sydney, Melbourne and Brisbane. We are one of the most urbanised countries in the world: The percentage of Australians living in cities has increased from 58% in 1911 to 90% in 2021. Mixed into that problem is the fact that not all people are able to or want to buy a home.
A recent study by the two principal national investment property organisations (PIPA and PICA) has detailed the rental crisis problem. According to the research, Australia’s population over the March 2019-2024 period created requirements for an additional 212,000 rental properties. To meet this demand around 145,000 additional property investors were needed. Yet Australian Taxation Office data reveals only 110,000 additional investors through that period, leaving a shortfall of nearly 35,000 investors.
Longer term older data 2003 – 2017 showed increases in individual property investors ranging from 56,000 to 60,000 per annum. According to Nicola McDougall of PIPA “This trend disappeared after 2018 due to factors such as restrictive lending policies, increased market interference, new regulations, minimum standards, and higher taxes, which have discouraged investors”
The 2024 study also alarmingly showed increasing property investors leaving the market, with about 65% of those investment property sales then being purchased by homeowners rather than investors. That is great for those homebuyers, but not for renters. National vacancy rates have correspondingly decreased from around 3% (which is considered a normal and balanced market) to just 1.2%. A very real rental crisis.
That study and these numbers reflect what we have also seen at Integrity Finance Australia: Increased investor sales without investor purchases over the last 5 years. Followed by rapid increases in rents over 2023- 2025 largely due to the lack of rental properties available in the marketplace. That was then; this is now.
In this office, we are now seeing the beginning of the wave the other way - increasing numbers of investor enquiries and purchases. All signs point to 2025 being a great time to invest in property, price growth being supported by strong and increasing demand, limited supply, increased rental yields, decreasing interest rates, tax advantages and long-term capital appreciation.
My view is we are moving into a booming market. From an altruistic point of view the perfect world is investors buying new builds. There is a chronic shortage of housing: what we need is more houses built. This is also what the government wants, with depreciation benefits specific to new housing. By doing this you are building your own wealth and contributing to society. With that comes the warning to all: The construction industry has been through a very tough time and is a minefield! We recommend you tread with caution and take expert advice and guidance. Do not try to ‘go it alone’: The complexities of this market and the potential pitfalls are numerous.
Integrity Finance Australia has been serving the community since 2006, has experience in these matters, and is able to assist. If you have any questions on the issues raised in this article, particularly if you are considering investing in new builds, then please contact us.