A reality check for property investors in late 2025
A reality check for property investors in late 2025
For the better part of this year, investors have been hanging on for the same thing:
enough rate drops to take the pressure off their investment loan.
But the latest numbers have pulled the rug out from under that hope.
Inflation jumped back up to 3.2% in Q3 (up from around 2.1% in Q2), driven by stubborn services inflation and higher household spending.
Unemployment fell to 4.3% in October, with more than 55,000 additional full-time jobs — a sign of strong demand and wage pressure.
And national home values have climbed for nine straight months, up 5.4% over the year.
Put those three ingredients together and you get one clear signal:
Rate cuts aren’t coming to save your cash flow — at least not any time soon.
Even the RBA’s November outlook confirmed it. They noted capacity pressures are “more pronounced than expected,” inflation is proving sticky, and unemployment is likely to stabilise “near 4½%” rather than easing meaningfully.
A month ago, markets were still pricing in multiple cuts for 2025.
Today? Those expectations have evaporated. Some banks now forecast no cuts at all, while others allow for just one, and only if inflation behaves.
And if you want to know what lenders really think, look at fixed rates: most banks have lifted them to sit almost on par with variable rates, historically the clearest sign they’re not expecting cheaper money ahead.
So if you’ve been holding an investment property waiting for lower rates… you may need a new plan.
The uncomfortable truth: not all investment properties deserve to be held
Most investors own one or two investment properties — and not all of them are winners.
Some are:
- strong capital-growth performers
- low-cost to hold
- well-located
- and worth riding out the cycle
But others are:
- heavily affected by strata
- low-yield
- slow to grow
- or just expensive to keep above water
Up until now, many people have held onto the second category believing:
“Once rates come down, this will feel better.”
But if rates don’t come down?
The maths stops being your friend.
Let’s use a real scenario:
- A two-bed unit in Kingston
- Worth around $750,000
- Rents for around $700/week
- After strata and management, nets about $500/week or $25,000/yr
- Interest-only cost at current rates = roughly $40,000/yr
That’s $15,000 out-of-pocket every year, not including maintenance, insurance, or surprises.
And here’s the key question:
Is the property going up by more than $15,000 a year? If not, you’re going backwards.
As a rule of thumb, if your annual holding costs are 3–6% of the property’s value and the property isn’t growing more than that, it’s an underperforming asset — even after tax.
Rate cuts were supposed to relieve that pressure.
But now the pressure stays.
Which means holding the wrong property could slow down your entire long-term strategy.
The window that does exist: selling to first home buyers
Here’s the twist in this moment of the cycle:
First home buyer demand is running hot — and they’re competing hardest in the exact price bands investors often own.
Agents are reporting:
- Multiple offers
- Same-day exchanges
- Buyers missing out
- Competitive bidding in the $600k–$850k range
First home buyers aren’t rate-sensitive in the same way investors are — they buy based on emotion, life stage and urgency, not yield.
This creates a real, short-term opportunity:
If you sell an underperforming property now, you’re selling into one of the strongest first-home-buyer markets of the past 18 months.
This isn’t about quitting property.
It’s about repositioning.
For example, one of our clients this week realised that by selling an expensive-to-hold property now, they could:
- Clear $500,000 of their home loan
- Reset their borrowing power
- And buy an off-the-plan investment timed perfectly for when they’re ready to borrow again
Same investor.
Better structure.
Less drag.
Stronger long-term outcome.
That’s the whole point.
What should an investor actually do right now?
1. Review each property properly
Not surface-level.
Not emotional.
Not “it used to perform”.
Run proper numbers:
- Net rent after all costs
- True holding cost %
- Past 3–5 years of growth
- Vacancy trends
- Likely future demand (population growth, supply pipeline, local wage growth)
- Strata + sinking fund risk
If it’s costing you too much and not growing?
It’s a problem — not a strategy.
2. Decide which properties to keep — and which to offload
Most people own:
- One great long-term performer
- And one “this just isn’t doing what I hoped” property
If the only reason you were keeping the second one was “waiting for rates to drop,” that chapter has changed.
Sell it now while first home buyers are active, take the profit, and reset your base.
3. Recycle the capital into something smarter
That could mean:
- Paying down your owner-occupied loan for instant breathing room
- Buying two smaller, better-yielding assets
- Moving into a different market with lower strata and higher rental demand
- Or simply removing a financial drain that’s slowing your entire portfolio
This isn’t about being conservative — it’s about being strategic.
High rates don’t stop good investors.
They just force them to make smarter decisions.
The bottom line: rates may not fall, but your strategy can still move forward
You can’t control:
- the RBA
- inflation
- fixed-rate pricing
- or the banks’ forecasts
But you can control what you hold — and whether your portfolio is working for you or quietly draining you.
If you’ve been waiting for rate cuts that may not arrive, it might be time to reassess.
Sometimes the strongest move you can make is clearing the dead weight so your next property is the right one.
If you’d like us to run the numbers on your portfolio — what to keep, what to offload, and what your next best step might be.
We can map it out with you. Book a free 30-minute finance strategy session
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).