‘Financial vulnerabilities’: The home buyers keeping the RBA on its toes

Property investors are keeping the Reserve Bank of Australia on alert over concerns that rising investor activity may lead to greater volatility for home prices and the wider housing market.

In the RBA’s latest financial stability review, released twice a year, the central bank warned that increasing property investor activity could pose a risk to Australia’s housing market.  

“A sharp rise of investor activity from already elevated levels could lead to a build-up in financial vulnerabilities if it significantly amplifies the housing credit and price cycle,” the report said.  

The RBA has cut interest rates three times this year – a move that has enticed property investors back into the market.  

Growth in investor housing lending has increased over the past year and now sits above its post-Global Financial Crisis average, the RBA said.  

The latest lending data from the Australian Bureau of Statistics shows that new property investor loan commitments rose 3.5% during the June 2025 quarter, and was up 0.8% year-on-year.

Property investing has also been front of mind for many Aussie households, according to a recent Mortgage Choice survey which revealed the top reason buyers were looking to purchase a subsequent property was to buy an investment property.  

The survey, conducted in the June quarter, found that 45% of respondents wanted to buy an investment property as the main reason to buy a subsequent property, up from 42% the previous quarter. 

It comes as national home prices grew 6.2% over the year to September, adding around $54,100 to the value of the median home. Home prices have surged 50.6% over the past five years, according to the latest PropTrack Home Price Index.  

REA Group senior economist Eleanor Creagh said Australia’s housing market is poised for further gains throughout spring, although the pace would vary across cities as momentum shifted. 

“Looking ahead, this year’s series of interest rate cuts, improved sentiment and the October expansion of the Home Guarantee Scheme will add support,” she said.   

“With stock on market constrained and new supply challenged, demand-side stimulus will intensify competition.” 

The RBA’s financial stability review said investor lending in Australia historically had relatively low default risk, but investors tend to drive housing price changes more than owner occupiers.  

“Investors might be more likely to sell their investment property if they expect prices to fall because many properties incur carrying costs (net of rental income) and because it is an investment rather than their principal place of residence,” the RBA said.  

“Conversely, periods of rapidly rising prices might create the expectation of further price rises, drawing more investors into the market as capital gains can be a larger part of their decision to purchase.  

“A high concentration of investors could therefore contribute to a housing price upswing that raises the risk of, or exacerbates, a subsequent market correction down the track.  

“If sufficiently severe, such a downturn could deplete households’ equity buffers – particularly for new and highly leveraged borrowers – and result in broader economic disruption.”  

While the RBA remains on alert about the potential risks posed by an influx of property investors, the central bank noted housing-related vulnerabilities are contained at the moment.  

Australian home price growth – September 2025

The RBA left the cash rate on hold at 3.60% this week in a largely expected move that disappointed many mortgage borrowers, given earlier forecasts predicted four or more rate cuts this year. 

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