Investor Retreat Deepens as Tax Reform Fears Mount

Australia’s rental market faces further strain as new data reveals thousands of property investors are exiting the sector amid rising costs and tax reform uncertainty.

Analysis of Australian Taxation Office (ATO) figures by the Property Investment Professionals of Australia (PIPA) shows the steepest annual decline in individual property investors in more than 25 years, excluding the GFC and COVID. In 2022–23, the number of investors fell by over 7,000, reversing decades of steady growth.

GALLERY  

PIPA Chairman Lachlan Vidler said the figures confirm a structural shift in the market. “Investors are selling up, and the homes they leave behind are often snapped up by owner-occupiers, permanently removing them from the rental pool,” he said.

The 2024 PIPA Annual Investor Sentiment Survey supports this trend, finding that 14.1 per cent of investors sold at least one property in the past year, compared to 12.1 per cent in 2023. Of those who sold, almost 65 per cent had held the property for less than 10 years, while nearly 20 per cent had owned it for under three years.

“These are not long-term investors cashing out after decades,” Mr Vidler said. “They are people who entered the market with good intentions and were forced out by rising costs and policy uncertainty.”

Survey respondents cited increased holding and compliance costs (44.1 per cent) and higher land tax and government charges (35.4 per cent) as major pressures. Yet it was the fear of tax reform that stood out, with 44 per cent of investors saying potential changes to negative gearing or capital gains tax (CGT) would influence their decision to sell.

Mr Vidler said government interference has become the number one concern for investors. “All they want is clarity and consistency. They cannot plan for the future when the rules keep changing,” he said.

With vacancy rates already at record lows, PIPA warns that further investor withdrawals will only worsen the rental crisis. Mr Vidler urged the government to reaffirm support for negative gearing and CGT concessions, which have underpinned private rental supply for decades.

“We need more rental properties, not fewer,” he said. “Undermining investor confidence now is reckless and will deepen the rental crisis.”

Images via PIPA

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