When evaluating a suburb for investment, one often overlooked factor is the ratio of owner-occupiers to renters. This proportion can reveal a lot about the community’s character—and more importantly, it can help forecast potential capital growth.
Let’s define what we’re talking about: if a suburb has a population of 1,000 people, with 700 living in homes they own and 300 living in rentals, then the renter proportion is 30%. Simple maths, but the implications are significant.
Check out “Crunching the Numbers: Positive Cash Flow vs. Negative Gearing“
Why the Owner-to-Renter Mix Matters
Owner-occupiers typically take better care of their homes than renters. They’re more likely to maintain or even improve their property, not just for functionality but also for aesthetics. Over time, this can lead to overcapitalisation—which, in this case, is a good thing because it lifts the overall quality and appeal of the neighbourhood.
From an investor’s perspective, fewer rental properties in a suburb mean less competition for tenants. So, the proportion of renters becomes a strong indicator of supply in the local rental market.
But here’s the key question: is there an optimal mix that signals better capital growth?
The 65–70% Owner-Occupier Rule
Some experienced investors suggest that when a suburb reaches around 65% to 70% owner-occupiers, it signals the best time to sell. The logic is that high owner-occupancy typically indicates strong emotional buy-in from residents. This often aligns with rising property values.
However, these are general opinions, and hard data is often lacking. What we do know is that this owner-to-renter ratio is a powerful supply-side metric, and investors should be cautious not to misread it as a demand indicator.
“Get your Access to our Fully Customisable Investment Property Research and Analytics Tool Now!”
Supply vs Demand: Don’t Confuse the Two
It’s easy to assume that a high renter percentage means strong demand from tenants. But that’s not necessarily true. The ratio of renters to owners only tells you how many rental properties exist—it’s about supply, not demand.
Let’s unpack this with a basic economics principle. If demand outstrips supply, prices rise. In a rental context, if lots of tenants are competing for just a few rental properties, vacancy rates fall and rents rise. For buyers, it works the same way: when more owner-occupiers are competing for limited listings, sale prices rise. That’s your capital growth trigger.
So when looking for your next investment location, don’t just ask, “How many renters are there?” Instead, ask, “How many rental properties are there compared to demand?”
What’s the Best Percentage of Renters?
Some investors believe 25% is the sweet spot. Others aim for around 30%. But here’s a bold claim: if you’re chasing capital growth, the best renter percentage might be zero.
That’s right—zero renters doesn’t mean no demand from tenants. It means there’s currently no supply of rental properties. That’s a golden opportunity if demand exists. And guess what? Owner-occupiers and renters generally want the same things: access to schools, shops, parks, jobs, and a safe, clean neighbourhood.
So, a suburb with high owner-occupancy is often a highly desirable place to live. The absence of renters doesn’t indicate lack of interest from tenants—it suggests tight supply.
Be Wary of Misreading the Data
The renters’ ratio is often misunderstood. Many interpret it as both a supply and demand indicator, which is problematic. If you believe renters aren’t present because there’s no demand, you might overlook a high-growth opportunity where demand exists but supply is constrained.
Imagine being the only landlord in a suburb full of tenants who want to live there. That’s a powerful position. Your property will be in high demand, and you’ll have your pick of applicants.
“Get your Access to our Fully Customisable Investment Property Research and Analytics Tool Now!”
A low percentage of rental properties in a suburb can be a strong signal of limited supply and a well-maintained community—two major factors that support capital growth. The key is not just identifying the proportion of renters but understanding what that figure represents.
Always remember: renter proportion is a supply metric, not demand. Misinterpreting it could lead you down the wrong investment path.
