Interest rate rises have not deterred those investors who are keen to return to the market as they are achieving good yields and strong rental demand.

The value of new investment loans doubled to $11 million in the 12 months to the end of March.

The investor share of mortgage activity as a proportion of the whole mortgage market, remains below the decade average of 35% and is sitting close to 30%.

Australian Finance Group chief executive David Bailey says investment loans now account for about 26% of its business after dropping to 21%.

“It is a slow rebuild,” he says, “But investors are attracted by very low vacancy rates and positive yields.”

He says rents are increasing by more than 20% in some capital cities.

CoreLogic figures show gross rental yields are 6% in Darwin, 3.8% in Canberra and Perth and 3.5% in Adelaide.

In Melbourne gross rental yields are 2.8% and in Sydney they are 2.5%.

SQM Research director Louis Christopher says that investors can expect even higher rental yields as prices fall in some major markets, notably Sydney and Melbourne.

But house prices continue to rise in the smaller capital cities, including Brisbane, Perth and Adelaide, and in many regional markets.