Increased investor activity is pushing house prices up nationwide.
According to Cotality's September Home Value Index, residential property prices increased 2.2% nationally in three months leading up to 30 September, or 4.8% annually, with the median value of a home in Australia coming in at more than $857,000, (or more than $1.2 million in Sydney.)
But the growth spurt is not limited to Sydney. Home values in all of Australia's capital cities are rising. Values in Darwin and Brisbane were up 12.9% and 8.8%, year-over-year, respectively, while Darwin, Perth and Brisbane were pushing 2% growth in October alone.
"And that's sort of too fast, I think, for the RBA at the moment," Sally Auld, chief economist at National Australia Bank (NAB), said during a webinar attended by Australian Broker.
All of this is unfolding despite three rate cuts in 2025 and updated government schemes in 2025 meant to give first-time buyers a boost onto the property ladder.
The leading driver: increased investor activity.
"The value of new loan approvals for investors in any given month has shot higher, as of late," the economist explained. "When we look at the actual numbers, what we find is that the value of actual lending to investors has jumped by almost 20% in the last three months, the three months to September. If you times that by four, you get a very big number. And a number that is probably not where the Reserve Bank [of Australia] (RBA) and bank regulators would actually like that to be."
She added that "it's quite possible that we see, maybe, some macroprudential regulation appear from APRA. There's certainly discussion in the broader market that could be coming down the pipe. And I suspect the focus of those regulations if they do actually land is more likely to be investor lending rather than owner-occupier."
But regulators have already taken note. On Thursday, the Australian Prudential Regulation Authority (APRA) announced new lending limits for high debt-to-income (DTI) mortgage lending. The new rule, starting 1 February 2026, limits high DTI home loans — that is, loans where debt is six times higher than the borrower's income — to a maximum of 20% of each lenders' new mortgage lending each quarter. Each lender can allocate 20% to owner-occupiers in a quarter, and another 20% to investors.
However, investors, who often borrow more aggressively and at higher multiples, will likely feel the squeeze the most.
But according to APRA Chair John Lonsdale, this is precisely the point.
"At this point, the signs of a build-up in risks are chiefly concentrated in high DTI lending, especially to investors," Lonsdale said in a statement. "By activating a DTI limit now, APRA aims to pre-emptively contain risks building up from this type of lending and strengthen banking and household sector resilience."
The chair added, however, that "while strong investor activity can amplify housing lending and price cycles that can impact financial stability, we are not yet seeing signs of the broad-based build-up of housing vulnerabilities, including a deterioration in lending standards that we have seen in previous episodes of strong investor activity."
But market players say some of the effects are already evident.
"Some of the anecdotal evidence that we've heard from real estate agents is that part of the strength of that investor lending in the third quarter was investors trying to front-run what they believed would be a pull forward in demand in October for first home buyers," Auld said.
Hobart-based economist Saul Eslake was more adamant that investors were "absolutely" the culprit.
"Investors are driving this renewed increase in house prices," the economist told Australian Broker. "History tells us that investors are much more responsive to movements in interest rates than owner occupiers are. And investors like to say that they're creating a new supply of rental housing. But when they buy a property that's already there, they're not doing that. They're not buying new properties and they drive up prices.
"They are disproportionately driving up prices to the detriment of would-be first home buyers," he added. "And I think that's a bad thing."
