Why a Decline in Rental Properties Isn't Good News

Recent data has highlighted a growing trend of investors leaving Australia's property market, raising concerns about the future supply of rental homes.

According to FoundIt, investors sold significantly more rental properties than they purchased in May. In Victoria alone, 1,663 investment properties were listed for sale, while only 1,021 were purchased by investors—a net loss of 642 rental homes. Queensland experienced a similar pattern, with an estimated 993 investors exiting the market compared to 661 investment purchases, reducing rental supply by a further 332 properties.

Although Western Australia was not included in the data, local market trends suggest a similar shift may be underway. REIWA members reported increased investor sales before the 2026–27 Federal Budget, followed by a noticeable slowdown in investor purchasing activity.

At first glance, this may seem like positive news. Fewer investors can mean less competition for buyers, and when an investment property is sold, it may provide an opportunity for someone to enter the housing market.

However, there's another side to the story.

When an investment property is sold to an owner-occupier, it doesn't disappear—but it often disappears from the rental market. For the tenant living in that home, this can mean being forced to find another rental in an already competitive market.

Many renters are simply not in a position to purchase the home they are living in. They may not have saved a sufficient deposit, may not qualify for a home loan, or may not be ready to buy due to their personal or financial circumstances. As rental supply continues to tighten, these tenants face fewer housing options and greater pressure from rising demand.

The Federal Government's new taxation policies may encourage investors to purchase newly built homes, helping to restore some rental supply over time. However, investment decisions are driven by more than tax incentives. Investors also need confidence that a property will provide strong rental demand and a worthwhile financial return.

Many new housing developments in Western Australia are located on the outskirts of Perth, where tenant demand may not be as strong as in more established suburbs. Even if investors choose to build, it can take 12 to 18 months before those homes are completed and become available to rent.

With housing affordability and rental availability remaining key challenges across the country, maintaining a healthy supply of rental properties is essential. The combined impact of taxation changes and upcoming reforms to Western Australia's Residential Tenancies Act will likely influence investor confidence in the months ahead.

For both tenants and the broader property market, the hope is that these changes encourage balanced investment rather than reducing rental supply further. As always, the full impact will become clearer over time.