Investors view Melbourne as ‘best place to buy’ despite recent selloff

Victoria has been ranked as the worst state to be a property investor for a second year straight, but that may be about to change as an overwhelming proportion see buying opportunities in Melbourne.

A new survey undertaken by the Property Investment Professionals of Australia (PIPA) in August this year found the most investor sales were taking place in Melbourne, with 22.1% of respondents selling at least one property in the city over past year, up from 18.4% in 2024.

Brisbane followed closely at 19.7%, up from 16.3%. Perth entered the top three for the first time, with 11% of investors selling, while Sydney saw a notable decline to 6.3%, down from 10.2%.

Melbourne was also crowned the least accommodating state for property investors for a second consecutive year, with the state seen as “hostile to investment”, with “punitive or overly restrictive” policies. The ACT and NSW rounded out the top three.

PIPA chair Lachlan Vidler said that Victoria continued to see elevated levels of investor sales.

“The combination of rising land tax, new vacancy levies and ongoing tenancy reforms is creating a climate of uncertainty. Many investors are simply deciding it’s no longer worth the risk or cost to hold property in the state.”

But years of lagging price growth – and signs Melbourne is on the cusp of a turnaround – is luring many back in.

About 41% of investors now view Melbourne as the best place to buy right now, up strongly from 26.3% last year.

Good long-term capital growth prospects was the top reason supporting investor optimism (70.3%), followed by good population growth (58.5%) and being a major capital city (52.1%).

Seasoned investors offload properties at highest rate in four years

The survey, now in its eleventh year, offers a snapshot of the nation’s investor psyche.

But despite pockets of optimism, it found investors are steadily offloading rental houses which is fundamentally reshaping the market, with fewer homes available for tenants and increased pressure on affordability.

The survey found that investor sentiment around selling is intensifying. This year, 36% of respondents said it was a good time to sell – up from 29% last year.

The survey found that 16.7% of investors considered selling at least one investment property over the year to August, up from 14.1% in 2024 and 12.1% in 2023.

The majority of the 854 investors that took part in the survey who sold a property over the past year were seasoned investors.

More than half of the property investors surveyed had held their property for at least five years, blaming overall debt exposure, rising compliance costs, property management fees, and minimum standards for wanting to exit the investor market. The heavy weight of regulatory red tape and policy impacts such as the threat of negative gearing changes was also blamed.

PIPA says the findings underscore the fragility of investor confidence in the face of potential federal reforms.

The survey found that only 42% of sold properties were purchased by other investors, the remainder
were absorbed by owner-occupiers (37%) and first-home buyers (25%).

Mr Vidler says the implications for renters are severe.

“Once a property leaves the rental market, it rarely returns. We’re watching the slow dismantling of Australia’s rental supply, and tenants are paying the price through rising rents and reduced availability,” he said.

“The private rental market is losing stock at a time when demand is surging, and policy uncertainty is only making things worse. This shift is structural, not temporary.

“If this trend continues, we’ll see even greater strain on the rental market, and tenants will bear the brunt.”

Reasons for leaving

The reasons for the investor exodus include the constant shifting of policy settings by various levels of government, often framed as tenant-friendly reforms, which the survey found is steadily eroding investor confidence and constraining rental housing supply.

Nearly half of respondents said it was the growing negative public perception of property investors, who have been labelled ‘greedy’ and ‘destroyers of the housing market’ in multiple media stories in recent years.

Research any property

Get all the property intel you need.

Search now

Government interference has also been an issue, including a lack of clear communication from state governments about tenancy reforms. A staggering 64% of respondents were unaware of Victoria’s new vacant residential land tax. And around 60% of respondents said they had only moderate or limited knowledge of changes to tenancy laws across Australia, the report revealed.

Mr Vidler added that the potential for changes to negative gearing regulations would have further impact on the market.

“The mere suggestion of changes to negative gearing or Capital Gains Tax is enough to destabilise investor sentiment. These aren’t fringe concerns – they’re mainstream fears held by thousands of everyday Australians who provide rental housing.”

He wants to see investors listened to, clarity provided when regulatory changes are on the way, and less knee-jerk reforms introduced that negatively impact investors.

PIPA Victorian board director and buyer’s advocate Cate Bakos also laments a lack of consultation with property investors by the government.

“None of this is a shock to me. We’ve eroded our rental pool, and now the government wants to step back in and provide housing, but they can’t do it quickly enough to keep up with demand in the market,” Ms Bakos said.

“The government needs to understand that the task of providing rental housing has not sat with the state for the last five decades. There was clearly a decision made by the state government to have the private market provide rental housing.”

“Now that the private market has stepped in like the government wanted, they need to consult with property investors so they can absorb shocks in the market,” Ms Bakos said.

The post Investors view Melbourne as ‘best place to buy’ despite recent selloff appeared first on realestate.com.au.