Immigration rebound reignites property investment as rent squeeze returns
A property expert warns the rental crisis is set to worsen as rising immigration and shrinking vacancies attract investors back to a red-hot market.
Rising immigration and tighter vacancy rates have attracted investors back into the property market at the same time as reigniting a rental squeeze that signals tough times ahead for renters, a property adviser says.
“Things are going to get worse before they get better in the rental market,” AllenWargent co-founder Pete Wargent told The Australian’s latest Money Puzzle podcast.
News that vacancy rates have actually tightened again in recent months might be bad news for tenants, but for property investors the signal is clear: residential property is red hot again.
In fact, all the key signals that drove the last upswing in prices – which fizzled out at the tail end of 2024 – are back in place.
Immigration to date in 2025 has been rising – not falling – rental vacancy rates are shrinking – not expanding – and this time around interest rates are also coming down.
As Mr Wargent points out, forecasts that the local rental market would see an easing of pressure as immigration cooled over 2025 have been completely inaccurate.
“Every month they put out these arrivals and departures figures, and the expectation had been that immigration would gradually slow back down towards normal levels.
“But if you look at the permanent and long-term immigration on a net basis it’s back up. Over the past five months it’s been accelerating again. This is going to add to demand in property.”
On top of the surprising upswing on ‘the demand side’ through a rebound in immigration, Mr Wargent points out ‘the supply side’ numbers are also moving in the opposite direction many had expected.
After some pressure came off the rental squeeze in 2024, this year the so-called vacancy rate has come down again. The lower the vacancy rates, the less property there is available for rent.
“Vacancy rates have come down again pretty much everywhere while asking rents are lifting,” he said.
For investors the combination of tighter vacancy rates and rising immigration means a return to a market where ‘you can rent anything’.
Long-term vacancies are the biggest fear for investors in a residential market where the underlying prices have been consistently rising over a long period of time. In 2025 prices rose 5 per cent and in 2026 they are expected to rise by about 5-6 per cent.
It’s hardly a surprise that Mr Wargent adds that investors are now coming back into the market with the investor lending segments growing at a much faster pace than the wider property finance market.
For investors – and homebuyers – the reduction of interest rates are a key factor but Mr Wargent, in common with many in the property industry, is disappointed that banking regulators continue to demand a large ‘buffer’ for mortgage service testing.
Under current rules the banking regulator – the Australian Prudential Regulation Authority (APRA) – insists that all banks add a 3 per cent buffer. So an investor applying for a 6 per cent mortgage is assessed on their ability to repay a 9 per cent mortgage.
“We used to have a 2 per cent buffer, now it is 3 per cent and it is locking out a lot of lower-income households from the market,” Mr Wargent said.
“It looks like the government is trying to counteract this with its low deposit schemes, but the end result is that the government is pulling in two different directions.”
Nationwide vacancy rates have remained stubbornly at rock-bottom levels with the headline rate inching lower from 1.3 per cent in July 2024 to 1.2 per cent for the same period this year, according to SQM.
Investor lending was up 5.7 per cent year on year in June according to the Australian Bureau of Statistics, while the latest ABS net permanent and long-term arrivals data revealed a record 245,890 net arrivals over the first five months of the year.
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