One-third of investors ready to buy in 2025 amid challenges

A regular survey of investors has found that nearly one-third say they intend to purchase a property in 2025 - the highest percentage since the Covid property boom. 

That’s despite the highest interest rates in 13 years, a cost-of-living crisis and significantly higher property prices in most areas of Australia. 

The Australian Property Investor Magazine Quarterly Property Sentiment Report also shows that investors are being deterred by expensive real estate in New South Wales, with many selling up to cash in on high prices, while others seek out more affordable property in Queensland and Victoria.

The details

Every three months, API Magazine attempts to gauge the mood of Australia’s property investment community.

While the survey is often based on a relatively small sample of respondents (323 people took part in the latest December 2024 quarter survey), the findings contain some interesting insights into the mindset of investors and their expectations of the year ahead.

Key among the latest survey’s findings is that 30% of respondents indicated that they intend to buy property in the coming 12 months and 2/3rds of that number were intending to purchase investment properties.

API Magazine Editor Craig Francis says that “not since midway through 2022 have so many respondents indicated that they intend to buy property in the coming 12 months.”

That was at the height of the Covid property boom, when many Australians were falling over themselves trying to buy property, lured by emergency low pandemic interest rates.

As an example, in June 2022, the RBA cash rate was 0.85%, meaning retail mortgages were being offered to new customers at an average of about 3.1%.

Compare that to now; the RBA cash rate is currently at a 13-year high of 4.35%, equating to retail mortgages of more than 6%.

“For 18 months, the proportion of respondents looking to sell has remained stable at around 11 to 12%, compared to buyers at a very active 30%,” Craig Francis says.

“It’s that gaping differential between sellers (supply) and buyers (demand) that pushed prices ever upward over the past few years.

“Although median values have, for the first time in two years, inched lower nationally, it would be a brave pundit who predicted significant declines in 2025 based on our survey results,” he says.

Where are investors buying and selling?

“While it’s Queensland, a magnet for interstate migration, that continues to attract the most buyer attention, Victoria was the surprise second, placing ahead of New South Wales, when it came to purchasing property,” API Editor Craig Francis says.

Mr Francis indicates affordability and supply are behind this shift in sentiment.

“Victoria’s property market has been dormant in recent years, weighed down by policies that hit landlords hard,” he says. 

“On a more positive note, but still suppressing prices, the state has managed to build enough homes to meet the supply needs that other states are proving woefully inadequate in achieving.”

It’s a different story in New South Wales.

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“As Sydney’s property market has begun to inch downwards, sellers have taken the opportunity to offload property. 

“Of those who sold properties in the past 12 months, a quarter did so in NSW, compared to a significantly lower 18% who said they had purchased in the last 12 months.”

While Queensland was the top investment destination with 31% of property purchases, it was also home to the most active sellers, with 33% of respondents saying they’d sold a property in the Sunshine State in the past year.

When you look at the reasons investors gave for selling their properties, it’s logical to surmise that many who sold up in Queensland were prepared to cash in on the recent price boom in the Sunshine State and reduce debt to more manageable levels, at a time of persistently high interest rates.

Queensland also dominated when respondents were asked which state or territory they thought had the best investment prospects in 2025, with 34%.

While Victoria came in second with a respectable 20%, this was down from the 25% recorded in the last API quarterly survey.

What are investors buying?

The API survey finds that property buyers are again increasingly favouring freestanding houses as their preferred real estate investment.

“While still some way short of the 45% recorded in Q2 2022,” Craig Francis says, “the proportion of buyers looking to purchase a house has risen steadily for six months to 39%. 

“This has largely come at the expense of units and commercial and, to a lesser extent, rural property.”

Optimism tempered

The slowdown in the property market towards the end of last year has led to more uncertainty among investors about price growth in 2025.

69% of those surveyed thought prices would rise in 2025, down sharply from 81% in the previous quarterly survey.

However, few expect prices to go backwards, with less than 10% expecting prices to fall.

22% say they expect prices to remain essentially level in 2025. 

Investors looking for good rental yields and good tenants

Interestingly, the Australian Property Investor Magazine Quarterly Property Sentiment Report shows landlords now have greater expectations around what constitutes a decent rental yield.

The highest proportion of respondents (35%) say they believe a rental yield of 4.6-5.5% was “satisfactory”- the highest since this measure was first recorded.

Just three months ago, most were willing to settle for a rental yield of 3.6-4.5%.

However, in an acknowledgment that investors understand the pressure on tenants at a time of high rental growth, four-fifths of landlords say they would rather hang onto a good tenant than pursue higher rental returns.