Investor Money Is Shifting: QLD and WA Cool While Victoria Stages a Comeback

Australia's property investment landscape is rebalancing. After years of rapid growth in Queensland and Western Australia, new data shows investor activity in those states is moderating - particularly in regional mining towns and outer suburbs where prices have run hard. At the same time, Victoria is staging a genuine comeback as price resets improve yields and attract bargain hunters. But the picture is more nuanced than the headlines suggest: QLD and WA still lead the nation for total investor lending, and the shift is gradual rather than a mass exodus.

The FoundIt Data: Where Transactions Are Shifting

A report by research group FoundIt tracked properties sold and subsequently listed for rent within 180 days, providing a snapshot of where new investor purchases are trending up or down.

The FoundIt Investor Index for the December quarter of 2025 shows some states gaining momentum while others cool off. It's important to note this measures the change in new transactions, not total volume - Queensland and WA still account for a large share of national investor lending.

Where Growth Is Slowing

Queensland and Western Australia saw the biggest drops in new investor transactions. The declines were concentrated in regional markets that had led the previous growth cycle, particularly mining service centres where affordability ceilings are being hit:

FoundIt head of research Kent Lardner noted that investors in areas like Townsville had "moved on" as yields compressed. In previously high-growth Perth suburbs like Armadale and Baldivis, the decline was influenced less by rents (which remained elevated) and more by a shift in the "risk-return equation" - investors decided the growth potential no longer justified the entry price.

Queensland's interstate land tax aggregation rules have also been a factor. A recent survey found that of investors who sold properties, 45% sold at least one in Queensland, with the land tax rules cited as a key reason.

Where Investors Are Going

Victoria emerged as the clear standout, recording a year-on-year lift of more than 400 investor transactions in the December quarter. ABS lending data confirms the trend: Victoria recorded 18.5% growth in investment loans in Q3 2025 and a further 8.8% rise in Q4. This marks a significant turnaround for a state where price growth has been sluggish in recent years.

"What's drawing investors back is the price reset that owner-occupiers have already felt, which has materially improved rental yields," Mr Lardner said. Investors have spotted a "rare window" where entry prices and tenant demand are aligning. KPMG forecasts Melbourne all-dwelling prices to grow approximately 7.3% in FY2026, with several analysts describing the city as "undervalued" relative to its long-run trend.

Tasmania recorded the strongest proportional lift of any state, signalling a recovery from a low base. Investor transactions surged by 171 year-on-year, and ABS data shows a 28.2% rise in new investment lending in Q4 2025 - the strongest quarterly growth of any state. However, Tasmania's picture is mixed: investor listings are 10.3% above the five-year average, suggesting some existing investors are also exiting. This makes it more of a rotation story than a one-way bet.

The CGT Factor: Should Investors Be Worried?

Adding another layer of uncertainty, proposed capital gains tax changes are weighing on investor sentiment. The proposal would cut the CGT discount from 50% to 25%. Real estate commentator Tom Panos warns it's already influencing some investors' decisions, with a recent survey finding that 35% of investors would sell if the reforms proceed. A Senate committee reviewing the changes is expected to report in March 2026.

However, Panos believes the long-term effect would be the opposite: investors would simply refuse to sell to avoid the larger tax hit, creating a "gridlock" in the market. Fewer listings would reduce stamp duty revenue for governments and further restrict housing supply.

"If you're going to actually do this, they won't sell. You create a gridlock. When there's a gridlock, you stop collecting the big money that is paid in stamp duty," Panos explained.

What This Means for NSW Investors

NSW recorded an essentially flat result, with just six additional investor transactions year-on-year. Sydney remains one of the more stable markets for investor demand, but the high entry price means many investors are looking elsewhere for better yields.

For Sydney-based investors, the key takeaways are:

• Local opportunities still exist: Western Sydney suburbs with strong rental demand continue to offer reasonable yields relative to entry price
• Interstate diversification is growing: Many NSW investors are now looking at Victoria and Tasmania for better value
• Timing matters for sellers: If you're considering selling an investment property, the proposed CGT changes add urgency - selling before any changes take effect could save tens of thousands
• Loan structuring is critical: Whether buying in NSW or interstate, the right loan structure can maximise your tax deductions and cash flow

The Bottom Line

The investor landscape is gradually rebalancing rather than dramatically shifting. Queensland and WA remain strong markets by volume, but growth is moderating from peak levels - particularly in regional mining towns and outer suburbs that led the 2023-2025 boom. Meanwhile, Victoria is staging a genuine recovery backed by ABS lending data, and Tasmania shows early signs of renewed interest.

For investors, the takeaway isn't to abandon one market for another - it's to look beyond the headlines and assess each opportunity on its fundamentals. Yields, entry prices, population growth, and your own financial position matter more than state-level trends. The best opportunities right now may be in undervalued markets where the risk-return equation has improved, but that doesn't mean the boom states are finished.

Sources: FoundIt Investor Index (December quarter 2025); ABS Lending Indicators; CoreLogic/Cotality; realestate.com.au