Victorian investor lending has collapsed to its lowest level since the Covid-19 pandemic, with Australian Bureau of Statistics data released this week showing just 6,819 loans issued to property investors in the September quarter — down from 11,150 a year earlier, a drop of 4,331 loans. According to realestate.com.au, the state has lost more than 16,000 rental homes to a landlord exodus in the three years to June, prompting the Real Estate Institute of Victoria and the Housing Industry Association to accuse both the state and federal governments of worsening the rental crisis they set out to fix.
ABS Lending Data Exposes the Scale of the Retreat
The numbers are stark against the last rate-hiking cycle. When the Reserve Bank lifted the cash rate a dozen times between May 2022 and June 2023, Victorian investor lending bottomed out at 6,890 loans — barely above the 6,819 recorded in this latest ABS release, despite the current hiking cycle delivering only a 1.25 percentage point increase so far in 2026 compared with the 3.75 percentage point rise over that 14-month 2022-23 stretch. That comparison matters: investor appetite has weakened at a fraction of the rate pain previously required to produce the same pullback.
For broader market context, see Bubblepedia's historical Australian property bubble analysis.
Victorian first-home buyer loans have not filled the gap either, falling from 9,983 in the September quarter a year ago to 8,337 in the latest data — evidence, as realestate.com.au reports, that the promised transfer of stock from investors to owner-occupiers has not materialised. Separately, Homes Victoria figures show the state's total rental homes fell from 681,141 in the June quarter of 2023 to 664,663 at the same point this year — a loss of 16,478 properties from the active rental pool in three years.
Victorian investor loans fell to 6,819 in the September quarter, down from 11,150 a year earlier — a 4,331-loan contraction that pushes activity close to the floor set during the 2022-23 cycle, when twelve rate rises delivered three times the borrowing-cost increase seen so far in 2026.
Land Tax and Negative Gearing Changes Compound the Squeeze
REIV analysis cited in the report shows the land tax bill on a median-priced Victorian investment property has more than doubled, from $1,597.50 to $3,474, following the state government's May 2023 decision — under then-premier Daniel Andrews — to lift land tax on secondary properties. Layered on top, the Albanese government's May 2026 changes to negative gearing and capital gains tax discounts have, according to REIV chief executive Toby Balazs, made "a significant impact on the property investors' willingness to continue purchasing."
Jellis Craig chief executive Andrew McCann, whose firm manages roughly 35,000 rentals across Victoria, said elevated landlord sell-offs have now persisted for three years, with his firm selling double the historical volume off its rent roll. He described the combined effect of state and federal policy as having "added fuel to the already lit fire." HIA chief economist Tim Reardon has separately warned that with private housing construction expected to slow in 2027, governments should bring forward public and social housing pipelines, noting Australia needs around 260,000 new homes annually to meet the National Housing Accord target.
Dandenong vs Toorak: Victoria's Own Two-Speed Market
REAStats suburb data illustrates why a statewide investor exodus lands unevenly. Dandenong, a key Melbourne rental corridor, carries a $680,000 median price, 2.3% annual growth, a 40-day average sales cycle and a 56% auction clearance rate. Prestige Toorak, by contrast, holds a $2,800,000 median with 4.5% growth, a tighter 23-day cycle and a 72% clearance rate — nearly double Dandenong's growth rate and a 16-point clearance gap. Prahran sits between the two tiers, at $1,550,000 median, 3.9% growth and a 69% clearance rate, while Reservoir, a more affordable north-of-the-river suburb, records $880,000 median, 2.8% growth and a 62% clearance rate over 32 days.
The spread across Newtown ($950,000 median, 3.8% growth, 52% clearance) and Kew ($2,100,000 median, 4.4% growth, 71% clearance) reinforces the same pattern: Victoria's more affordable, middle-ring suburbs are recording slower growth and lower clearance rates than its prestige markets, mirroring the two-speed rental supply dynamic REIV has flagged across the state.
Victoria Trails the National Investor Divide
Set against other states, Victoria's investor retreat looks structural rather than purely cyclical. REAStats records Nedlands in Western Australia posting 15% annual growth against a $2,200,000 median and a 15-day sales cycle — a market moving in the opposite direction entirely. South Perth, also in WA, shows 13.8% growth on a 17-day cycle. Queensland's West End posts 8.8% growth at a $1,350,000 median. Meanwhile, REAStats national figures put the clearance rate at 68.8% with Melbourne matching that national figure exactly, Sydney running slightly higher at 70.8%, and Brisbane at 67.2% — figures recorded under an RBA cash rate that has since moved to 4.85%, the highest in the current hiking cycle.
The divergence is consistent with REIV's argument that Victoria's land tax and tenancy reform settings, layered on top of national rate rises and federal tax changes, have produced a state-specific investor retreat not mirrored in WA or Queensland's growth figures — even though all three states operate under the identical 4.85% cash rate.
What This Means for the Rental Pool
Tight rental supply is the practical consequence of an investor exodus outpacing first-home buyer uptake. Understanding how vacancy pressure builds in a market losing net rental stock is central to assessing where rents are likely to move next; REAStats' rental vacancy rate explainer sets out how falling vacancy translates into landlord pricing power and tenant bargaining position — a dynamic directly relevant to the 16,478-home reduction in Victoria's active rental pool documented by Homes Victoria.
For agents and vendors, REIV has warned that Victorian rental stock disposals have continued to outpace new investor purchases under current tax and rate settings, with landlord sell-offs persisting in middle-ring suburbs like Dandenong even as prestige pockets such as Toorak hold firmer. For investors assessing interstate allocation, the gap between Victoria's 2.3% growth in Dandenong and Nedlands' 15% in Western Australia — under an identical 4.85% cash rate — underscores why REIV has called for the next Victorian government to urgently support an increase in rental homes, and why HIA has flagged a construction slowdown from 2027 as a reason for governments to bring forward public and social housing pipelines.
