Rental crisis worsens as investors exit the market, survey reveals
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Photo by Ivan Samkov
Australia’s rental market is facing an unprecedented crisis as a growing number of property investors are choosing to exit the sector. This alarming trend is driven by escalating costs, legislative uncertainty, and looming federal tax reforms, according to the 2025 Annual Property Investor Sentiment Survey released by the Property Investment Professionals of Australia (PIPA).
The survey reveals that 16.7% of investors sold at least one property in the past year, a significant increase from 14.1% last year and 12.1% in 2023. This marks the highest rate of investor sales since the survey first posed the question in 2022, underscoring a concerning trend that threatens to further strain the nation’s rental housing supply.
“This isn’t just a continuation of last year’s trend – it’s an acceleration,” said PIPA Chair Lachlan Vidler. “We’re seeing a growing number of long-term investors walking away, and the implications for renters are severe. The private rental market is losing stock at a time when demand is surging, and policy uncertainty is only making things worse.”
The survey found that only 42% of sold properties remained in the rental pool, as they were purchased by other investors. Meanwhile, 37% were bought by owner-occupiers and 25% by first-home buyers, effectively removing them from rental circulation. “This shift is structural, not temporary,” Vidler noted. “Once a property leaves the rental market, it rarely returns. We’re watching the slow dismantling of Australia’s rental supply, and tenants are paying the price through rising rents and reduced availability.”
Investor sentiment is deteriorating, particularly around proposed federal reforms. When asked whether they would continue investing in property if negative gearing was altered, 53% said they would stop investing, while an additional 25% were unsure. Only 22% were willing to continue under a revised negative gearing policy. Similarly, if the Capital Gains Tax (CGT) discount were reduced to 25% after 12 months of ownership, 35% of investors said they would exit the market, with 29% undecided.
“These figures show a clear erosion of confidence,” Vidler explained. “The mere suggestion of changes to negative gearing or CGT is enough to destabilise investor sentiment. These aren’t fringe concerns – they’re mainstream fears held by thousands of everyday Australians who provide rental housing.”
Queensland leads the nation in investor exits, with 35.5% of respondents selling at least one property in the state, up from 33.4% last year. Victoria follows closely at 30%, while New South Wales experienced a sharp decline to 11.8%, down from 25.4% in 2024. At the city level, Melbourne saw an increase, with 22.1% of investors selling at least one property compared to 18.4% last year. Brisbane followed closely at 19.7%, up from 16.3%. Perth entered the top three for the first time, with 11% of investors selling, while Sydney saw a notable decline to 6.3%, down from 10.2%.
“Victoria continues to see elevated levels of investor sales, and it’s no coincidence,” Vidler said. “The combination of rising land tax, new vacancy levies, and ongoing tenancy reforms is creating a climate of uncertainty. Many investors are simply deciding it’s no longer worth the risk or the cost to hold property in the state.”
The top reasons for selling this year included reducing overall debt exposure (41.7%), rising holding and compliance costs (40.4%), and increased land tax and government charges (32.9%). These figures, consistent with last year’s findings, indicate a slight uptick in financial pressure. Despite these pressures, most investors are absorbing the costs. A full 65% said they had passed on just 10% or less of their increased costs through rent hikes – virtually unchanged from last year. “This shows the resilience and responsibility of Australia’s property investors,” Vidler said. “They’re doing their best to shield tenants from rising costs, but there’s a limit. Without meaningful support, many will be forced to reconsider their position.”
Investor awareness of state-level tenancy law reforms remains low, with 64% of investors unaware of Victoria’s new vacant residential land tax. Additionally, 60% had only moderate or limited knowledge of tenancy law changes across Australia, and 10% said they had never received any communication from their state or territory government. “This is a failure of engagement,” Vidler stated. “Investors are being asked to navigate increasingly complex regulatory environments with little support or clarity. If governments want to retain private rental providers, they need to do a better job of communicating policy changes and providing guidance.”
Despite the challenges, nearly 60% of investors believe the next 12 months is a good time to invest in residential property, down slightly from 63% last year. This suggests a lingering belief in the long-term value of property investment, even as short-term pressures mount. “There’s still belief in the fundamentals of property investment, but that belief is more fragile,” Vidler said. “If governments want to preserve the integrity of the rental market, they must listen to investors, provide clarity, and avoid knee-jerk reforms that risk doing more harm than good.”
Melbourne was named the top investment destination by 41% of respondents, up sharply from 26.3% last year. “This surge reflects renewed confidence in the city’s long-term growth prospects and relative affordability compared to other capitals,” Vidler said. Brisbane held steady at 16.5%, supported by consistent rental demand and infrastructure investment.
The survey also revealed continued support for professional standards in the property investment sector. A resounding 94% of respondents believe that property investment advisors should have formal training or education. “Professionalism matters,” Vidler concluded. “In a market this complex, investors need trusted advisors who understand the landscape and can help them navigate it.”