Close to home
Most investors buy where they understand the market
Housing markets move because of behaviour.
Who buys. Where they buy. How often they transact.
Last year I examined the size and makeup of Australia’s investor cohort. That data cut through plenty of myth.
Now I want to answer two related questions.
Where are investors deploying capital?
And how frequently are they adding to portfolios?
Revisit
A Moment with Mike
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Synopsis
Most Australian property investors are local and cautious. 68% hold just one investment property and buy infrequently. The bigger issue is utilisation, with roughly 580,000 investor owned dwellings not currently rented. If rental supply is tight, policy must focus on incentives, behaviour and getting existing stock working harder.
1. Where do investors buy?
The image of the interstate portfolio builder snapping up homes across three states makes good headlines.
But it is not the dominant reality.
Most Australian property investors are local buyers. They purchase within the same metropolitan area where they live or within a nearby regional market they understand. Familiarity matters. So does proximity to agents, property managers and local knowledge.
Remember the structure of ownership. 68% of investor households hold one investment property. 20% hold two. Only 12% hold three or more.
That ownership concentration tells you something important. The typical investor is not building a multi state empire. They are buying one additional dwelling, often within commuting distance of where they live.
Interstate investment certainly exists. It tends to rise when affordability diverges sharply between capitals. When Sydney and Melbourne become expensive, capital flows toward Queensland or Western Australia. Yield and price differentials drive those decisions.
But the base case remains this. Most investors buy close to home. They are not exporting capital at scale every year. They are participating in markets they understand.
The geography of investor activity is therefore less dramatic than public debate suggests.
2. How often do investors buy?
The second misconception is frequency.
Investors are often portrayed as constantly adding to portfolios, accelerating prices and crowding out first home buyers.
The numbers do not support frequent acquisition behaviour for most.
If 68% of investors hold just one property, that implies limited repeat buying. Portfolio expansion tends to happen slowly and strategically. It requires equity growth, borrowing capacity and confidence.
Holding periods are measured in years, not months.
There is, however, a split within the investor cohort.
A meaningful minority transacts more actively. These are investors who buy, renovate, reposition or exit within shorter timeframes. They create turnover. They also contribute to rental churn.
The majority, though, buy and hold.
Buying frequency is cyclical. When credit is easy and prices rising, investor lending increases. When rates rise or policy uncertainty grows, activity slows. We saw this clearly over the past decade.
So is investor buying increasing or falling over time?
It oscillates.
In recent years investor lending rebounded after the Covid-related interest rate cuts, but long term mobility data suggests Australians overall are moving less. Investors are not immune to that trend. Rising transaction costs and tighter credit since 2022 have not encouraged rapid portfolio expansion.
The bigger structural story is not hyperactive buying. It is concentration and utilisation.
We know that around 580,000 investment properties are not currently rented out. That is roughly 41% of investor held dwellings sitting outside the long term rental pool.
That number dwarfs the debate about how often investors buy or how they are pushing out first home buyers.
If utilisation lifted, rental supply would shift materially without an additional dwelling being built.
Why this matters
When we better understand investor behaviour, the debate becomes less emotional and more structural.
Most investors buy close to home. Most do not transact frequently. A smaller cohort drives turnover. And too many investor hold homes that are not contributing to rental supply.
That leads to an important question. Are our housing incentives aligned with housing need?
Any changes to the taxation system, whether increasing capital gains tax or adjusting negative gearing, must be assessed through the lens of actual available rental supply.
We need policy settings that actively encourage the creation of new investment dwellings, while also ensuring that these new digs, and moreover, the existing investment homes are used productively.
That means aligning incentives so capital flows into additional supply, not just existing stock, and designing rules that bring under utilised dwellings into the rental pool rather than leaving them idle.
So why do Australian investors only own one investment property?
My take is that it isn’t about a lack of interest or even laziness. It is about constraint.
Property is capital intensive and heavily leveraged. After purchasing a family home, taking on a second large loan stretches borrowing capacity. Banks apply serviceability buffers. Interest rates move. Living costs rise. One investment property is manageable. Expanding beyond that quickly becomes uncomfortable.
Returns also temper enthusiasm too. Net rental yields, once you factor in management fees, maintenance, insurance, land tax and vacancy, are modest. Many investors are relying on long term capital growth, not strong cash flow. That makes scaling a portfolio slower and riskier.
Risk concentration plays a role as well. Multiple properties in the same market increase exposure to a single asset class, one interest rate cycle and one tax framework.
Most investors are not moguls. They are middle income households managing risk carefully.
And this limited ownership is why we need policy settings that get more of this stock into the rental pool and not just held, empty, waiting for capital gains.
Of course it would also help if we had some meaningful incentives to get more Australian investors to buy a second investment property.
Maybe a carrot approach would work best, but such largesse should only apply if they rent out their investment digs and also to long-term tenants.
Revisit
