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Residential property softens as 1 in 6 investors look elsewhere
With slow market conditions and changes to property taxation weighing on sentiment, almost 20 per cent of investors have begun exiting the market, according to recent data.
Investors are loosening their grip on the residential property market, with one in six having sold at least one asset in the year to August.
Data from the Property Investment Professionals of Australia’s latest Investor Sentiment Survey found that 18.3 per cent of respondents had sold at least one property, up from 16.7 per cent the previous year.
PIPA said the results marked the highest rate of investor exits in the survey’s recent history.
The survey showed that one of the reasons for fleeing the market was the government’s property reforms, passed earlier in May.
PIPA chair Cate Bakos said a significant portion of investors had fled the market in the wake of the reforms, particularly the changes to negative gearing and the capital gains tax discount.
“Last year, investors told us they would walk away if these reforms became law. This year’s survey is the first national read by PIPA since the changes were legislated, and it shows a lot of them are doing just that,” Bakos said.
She said increased holding costs driven by higher interest rates, land tax, and compliance costs had stretched investor capacity to financial discomfort.
While reducing total debt exposure was the number one reason investors were moving on from assets in 2025, they were driven by significantly different factors in 2026.
The survey found that general holding and compliance costs were the most common reason for sale at 37.1 per cent, followed by increased land tax or government changes and being well placed to realise a capital gain.
Additionally, the data found that most investors selling their assets were seasoned owners who had held their property for 10–20 years.
“These are not speculators flipping stock. These are people who have held rental property for a decade or two and have decided they have had enough,” Bakos said.
Qld investors flee in droves
Across the states, Queensland saw the largest share of investors’ sales across the nation, recording 37.1 per cent, followed by Victoria at 29.9 per cent.
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NSW held the third-largest share of investor sales, almost doubling from 11.8 per cent to 22.7 per cent.
Western Australia was again rated the most investor-friendly state, with a ranking score of 6.99 out of 8.
Conversely, more than 60 per cent of respondents ranked Victoria as the worst state for investors, marking the fourth consecutive year the state has been at the bottom of the list.
“Victoria has now been at or near the bottom of this ranking for four years running, and the ACT is right there with it,” Bakos said.
“Investors are voting with their feet, and it is renters in those jurisdictions who wear the consequences.”
Bakos said that across the country, renters would be the ones paying the price.
Data showed that with more than half of sales going to owner-occupiers, more investors leaving the market would mean fewer homes available for renters.
Additionally, with the property reforms now law, more than one in five respondents, or 21.6 per cent, said they were unlikely to buy again unless they were repealed.
“This is no longer a hypothetical debate about tax policy. Rental homes are leaving the market right now, and our members are seeing it play out in real time,” Bakos said.
Investors remain cautious
Despite the increased rate of selling activity, the survey found that most investors didn’t feel now was a good time to sell.
The survey found that just 7.6 per cent of respondents felt it was a good time to sell, a significant decrease from 36 per cent in 2025.
Similarly, just 44.1 per cent of investors said the next 12 months would be a good time to invest in residential property, down from 60 per cent last year.
“Once the trust in the stability of the tax system is gone, it is extraordinarily hard for the government in power to win that trust back,” Bakos said.
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