Industry body warns investor retreat may hit rental stock amid already tight supply
Proposed changes to capital gains tax (CGT) risk prompting a fresh round of investor sell-offs that could further squeeze rental supply, according to new research from the Property Investment Professionals of Australia (PIPA).
In its 2025 Investor Sentiment Survey, PIPA found that 35% of investors would halt further property investment if CGT were reduced to 25% after 12 months of ownership. The association argues that such a shift could accelerate the withdrawal of private landlords from the market at a time of already low vacancy rates.
PIPA said the findings show that tax policy uncertainty is already influencing investor behaviour. Among respondents who had sold at least one investment property in the previous 12 months, 19% cited perceived Federal Government tax reforms as a reason for selling. In addition, 51% of current investors pointed to the same concern as a major factor that might lead them to sell within the next one to two years.
“These numbers are not hypothetical because investors are already leaving,” said Cate Bakos (pictured top), chair at the Property Investment Professionals of Australia. “Our 2025 survey found that 16.7% of investors had sold at least one property in the year to August – up from 14.1% the year before and 12.1% in 2023.
“Of those who sold, 19% already did so because they fear tax changes, and another 35% are telling us they will walk if CGT reforms proceed, which is an extraordinary red flag for policymakers.”
SQM Research data have shown national residential vacancy rate at 1.4%, a level regarded by many analysts as indicative of a very tight rental market. Several capital cities are operating at even lower levels, with Perth at 0.7%, Adelaide at 0.9% and Hobart at 0.4%. Sydney and Melbourne, at 1.8% and 2% respectively, also remain below historical averages.
Bakos warned that any policy shift that hastens investor withdrawal could have rapid knock-on effects for tenants. “When vacancy rates are this tight, removing investors from the market is economically reckless,” she said. “Every investor who sells to an owner occupier removes a rental home from the system and tenants are the ones who suffer the consequences.”
SQM Research figures also indicate that advertised rents began rising again in early January, with national rents up 2.4% over 30 days and 5.8% over the year. That trend adds further pressure on households and may influence serviceability buffers and stress assessments undertaken by lenders and brokers.
“Investors provide more than 90% of Australia’s rental homes,” Bakos pointed out. “If governments want a functioning rental market, they must stop treating investors as expendable because the rental system collapses without them.”
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