Vacancy rates across Australian capital cities and the regions remain below two per cent, and competition for rentals is expected to remain strong, a report has found.
While higher interest rates could slow investor activity in 2026, tight rental market conditions means rental costs would continue to grow, the PropTrack Westpac Investor Report for 2026 found.
Property investors have been active in recent years, with new investor loans up 64 per cent from 2023 lows, REA Group senior economist Angus Moore said.
"On top of that, home prices have continued to rise, meaning that share of investor sales recording a profit has been the highest in at least a decade," he said on Thursday.
Only seven in every 100 investor sales failed to make a profit in the last few months of 2025 - the highest level in more than a decade.Â
Home price growth in Brisbane, Adelaide and Perth has been exceptional; with prices in these cities more than doubling since 2020.
Melbourne has recorded the slowest increase, with home prices up just over 20 per cent in six years, although investor inquiries about property in the southern capital were rising again.
Investors were particularly active in NSW, accounting for 44 per cent of home loans, up from 37 per cent in 2022 and 29 per cent in late 2020.
In Western Australia, South Australia, and Queensland, investors made up 40 per cent or more of total lending.
It was likely to be a challenging year for Australia's housing market, with higher interest rates capping property price growth, and the Middle East war adding an extra layer of uncertainty, Westpac chief economist Luci Ellis said.
"For RBA policy, this makes it difficult to judge how upside risks to inflation compare to downside risks to growth," Ms Ellis said.
"For housing though, the already very stretched starting point for prices means higher interest rates will weigh on affordability and buyer sentiment.
"We expect price growth to cool in 2026 to a more sedate five per cent gain nationally, down from eight per cent in 2025, and with a more pronounced slowing in the 'hot' markets of Brisbane and Perth."
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