Suburbs with a higher proportion of owner-occupiers have delivered stronger long-term capital growth than investor-heavy locations, with the gap most pronounced in Australia’s unit market, new research from Cotality has found.
The analysis, which examined around 3,000 suburbs over a 16-year period, found units in owner-occupier-dominated suburbs increased in value by 99 per cent between January 2010 and March 2026, compared with 65 per cent in investor-heavy suburbs. Applied to the national median unit value of $436,000 in January 2010, the difference equates to an estimated $148,000 in additional gross capital gains.
For houses, the gap was narrower. Low-investor suburbs recorded capital growth of 136 per cent compared with 117 per cent in investor-heavy areas, representing an estimated difference of $83,000 based on the January 2010 national median house price.
The findings come as Australia’s property market enters a period of slower growth and investors prepare for changes to negative gearing and capital gains tax arrangements announced in the Federal Budget.
Cotality Economist Annabelle Mezieres said the research highlighted a consistent pattern across the unit market.
“The results are consistent with the idea that owner-occupier heavy suburbs have tended to see stronger capital growth, particularly across the unit segment,” she said.
“Units in investor-heavy suburbs have historically underperformed because they can be more exposed to sudden supply spikes, changes in market sentiment, and shifts in credit conditions.”
She said owner-occupiers often approached housing differently from investors.
“Owner-occupiers typically buy with a focus on liveability and lifestyle, often inject capital via renovations, and hold assets longer, which supports value over time.”
The accompanying research notes that ownership mix appears to have a much stronger relationship with unit values than house prices. While owner-occupier suburbs generally outperformed nationally, the relationship for houses varied between cities, with Sydney and Melbourne showing little difference based on ownership composition.
Cotality’s analysis also found suburbs with higher rental ratios have generally produced weaker long-term returns, while areas with lower rental ratios have delivered stronger capital growth. The report suggests the rental ratio may serve as an early indicator of future performance, particularly in the unit market, although it should be considered alongside other investment factors.
The research argues investor-heavy markets tend to be more sensitive to changes in credit conditions, supply and buyer sentiment.
Cotality’s analysis also found suburbs with higher rental ratios have generally produced weaker long-term returns, while areas with lower rental ratios have delivered stronger capital growth
Developers frequently target these locations for apartment projects, increasing the potential for new supply to enter the market at the same time investor demand weakens. By contrast, owner-occupier suburbs often benefit from demand linked to schools, transport, amenities and lifestyle factors that are less closely tied to rental returns.
The findings arrive as investors account for a growing share of Australia’s housing finance.
Investors represented around 40 per cent of housing lending by value in the March quarter of 2026, the highest share since 2016, although borrowing conditions have tightened following the Reserve Bank’s reversal of its 2025 interest rate cuts. At the same time, proposed tax changes are expected to alter the economics of investing in established residential property.
The Federal Budget will grandfather existing negative gearing arrangements from 1 July 2027 while directing tax incentives towards new housing.
Cotality Senior Manager of Analytics & Data Science Thomas Clarkson said those policy changes could reshape investor demand.
“Future buyers of established stock may not have access to the same tax benefits or borrowing capacity, which could narrow the buyer pool in locations previously attractive to investors.”
He said investors would need to weigh the benefits of new housing against potential risks.
“While new builds will benefit from tax incentives, a high rental ratio could have implications for long-term capital gains.”
“Additionally, investors are likely to weigh higher entry costs, the potential for a shallower resale market, and reduced scarcity against the appeal of tax benefits derived from new housing options.”
The report also points to pressure on investor cash flows, noting gross rental yields across capital cities average about 3.5 per cent while investor mortgage rates remain in the low to mid-6 per cent range. With future tax concessions expected to play a smaller role for established properties, Cotality says investors may increasingly depend on capital growth rather than tax benefits to achieve acceptable returns.
Despite the findings, Cotality cautions that the relationship between ownership mix and capital growth is based on historical correlation rather than proof of causation. The methodology examined more than 2,200 SA2 regions between 2010 and 2026, grouping suburbs by rental ratios as a proxy for investor concentration. The company notes other factors may also influence long-term performance.
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