Lachlan Vidler

Australia’s rental market is under mounting pressure as a record number of property investors exit the sector, driven by rising costs, legislative uncertainty, and concerns over proposed federal tax reforms.

The 2025 Annual Property Investor Sentiment Survey, released yesterday by the Property Investment Professionals of Australia (PIPA), shows that 16.7% of investors sold at least one property in the past year – up from 14.1% last year and 12.1% in 2023.

This marks the highest rate of investor sales since the question was first introduced in the survey in 2022, highlighting a clear and escalating trend that threatens rental housing supply nationwide.

When PIPA first asked the question in 2022, about 17% of investors indicated they had sold at least one investment property in the previous two years or 8.5% annually over the past two years.

“This isn’t just a continuation of last year’s trend – it’s an acceleration,” PIPA Chair Lachlan Vidler said.

“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.”

Rental stock shrinking fast

The survey found that only 42% of sold properties remained in the rental pool because they were bought by other investors.

Meanwhile, 37% were purchased by owner-occupiers and 25% by first-home buyers, effectively removing them from rental circulation.

“This shift is structural, not temporary,” Mr Vidler said.

“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 deteriorating

The survey highlights a growing unease among investors, 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. An additional 25% were unsure, leaving just 22% willing to continue under a revised negative gearing policy.

Similarly, if the CGT discount were reduced to 25% after 12 months of ownership, 35% of investors said they would exit the market. Another 29% remained undecided and 36% said they would continue investing under the revised CGT conditions.

“These figures show a clear erosion of confidence,” Mr Vidler said.

“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.”

State-by-State sales breakdown

Queensland continues to lead 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 followed closely at 30%, while New South Wales saw a sharp decline to 11.8%, down from 25.4% in 2024.

At 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%.

Regional Queensland saw a particularly sharp rise, with 15.8% of investors selling, more than double the 7.6% recorded in 2024.

“Victoria continues to see elevated levels of investor sales, and it’s no coincidence,” Mr 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.”

Rising costs and legislative burden

The top reasons for selling in this year’s survey 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 are consistent with last year’s findings but show a slight uptick in financial pressure.

Operational costs continue to climb. This year, 39% of investors reported increases of between 11% and 20%, compared to 34% last year. More than 21% said costs had risen by 21% to 41%, and 5% reported increases of 41% to 60%.

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,” Mr 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.”

Policy confusion and communication gaps worsen

Investor awareness of state-level tenancy law reforms remains low. This year, 64% of investors were 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 – unchanged from 2024.

“This is a failure of engagement,” Mr Vidler said.

“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.”

Selling pressure intensifies

Investor sentiment around selling is intensifying. This year, 36% of respondents said it was a good time to sell – up from 29% last year.

The top reasons for considering a sale in the next 12 to 24 months was the future risk of federal reforms (51.3%), followed by increased compliance costs (49.8%) and land tax and government charges (49.8%).

Concerns about rental freezes or caps rose to 37.1%, up from 32% last year, while worries about proposed tenancy legislation increased to 32.4%, compared to 28% in 2024.

“These results reflect a broader unease among investors who feel they’re being squeezed from all sides,” Mr Vidler said.

“If this trend continues, we’ll see even greater strain on the rental market, and tenants will bear the brunt.”

A fragile optimism

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,” Mr 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.

“As Australia grapples with housing affordability and rental shortages, the voice of the investor has never been more critical.”

Best locations to invest

Despite widespread uncertainty, investor interest remains strong in select markets.

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,” Mr Vidler said.

Brisbane held steady at 16.5%, supported by consistent rental demand and infrastructure investment.

Perth, while still attracting interest, saw a drop to 9.2% from 25.2%in 2023, suggesting many investors believe its growth cycle may be tapering.

Among regional areas, Queensland led with eight per cent of investor interest, followed by Regional NSW at 5.5% and Regional Victoria on 4.1%.

“These areas are seen as offering strong rental yields, affordability, and lifestyle appeal, particularly for investors seeking alternatives to overheated metropolitan markets,” Mr Vidler said.

Support for professional standards remains strong

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 – unchanged from last year.

Additionally, 85% said that PIPA membership and adherence to a code of conduct would positively influence their decision to work with a property professional.

“Professionalism matters,” Mr Vidler said.

“In a market this complex, investors need trusted advisors who understand the landscape and can help them navigate it.

“That’s why PIPA continues to advocate for higher standards and greater transparency across the industry.”

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