Investor confidence in the property market is wobbling, with new data showing many landlords would quit if negative gearing or capital gains tax (CGT) breaks were wound back.

The 2025 Annual Property Investor Sentiment Survey by the Property Investment Professionals of Australia (PIPA) found 53% would stop investing if negative gearing was altered, while another 25% were unsure. Only 22% said they would keep investing under new rules.

Under negative gearing, if your rental property costs more to run than it earns, you can claim the loss as a tax deduction. Critics argue it pushes up house prices, while supporters say it keeps rental supply flowing.

The debate has reignited after a separate report by housing campaign group Everybody’s Home estimated tax breaks for short-stay properties like Airbnb and Stayz could cost the federal budget up to $556 million a year.

It is calling for an end to negative gearing on new investments, a phase-out of deductions on existing ones, and the removal of the CGT discount.

“Tax breaks need to be wound back for all investors, but it’s even harder to justify giving these generous benefits to short-stay operators,” says Everybody’s Home spokesperson Maiy Azize.

“The system is propping up investors who are speculating on short-term rentals during the worst housing crisis in living memory,” Azize says.

But PIPA chair Lachlan Vidler warned the sector is already fragile.

“Our figures show a clear erosion of confidence,” he says. “The mere suggestion of changes to negative gearing or CGT is enough to destabilise investor sentiment.”

Shrinking rental stock

Investor exits are accelerating. The PIPA survey found 16.7% sold at least one property in the past year – the highest level since the survey began in 2022.

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.

Equally however, these owner-occupiers wouldn’t be competing for rental properties any more – though that is far from the only factor driving demand.

Vidler says Australians are watching the “slow dismantling” of Australia’s rental supply, and tenants are paying the price through rising rents and reduced availability.

“This isn’t just a continuation of last year’s trend – it’s an acceleration,” he says.

Interestingly, it’s seasoned investors who are choosing to exit the market. Out of those who had sold, more than half had held their property for at least five years, with the most common holding period being 10 to 20 years (30.7%).

Vidler says 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.”

State reforms add pressure

Federal tax policy isn’t the only concern among investors, with state-level reforms weighing them down.

PIPA found 64% of investors were unaware of Victoria’s new vacant residential land tax, while 60% admitted they had limited knowledge of tenancy law changes nationally.

“This is a failure of engagement,” Vidler says. “Investors are being asked to navigate increasingly complex regulatory environments with little support or clarity.”

More than a third of investors now believe it’s a good time to sell, citing the risk of federal reforms (51.3%), rising compliance costs (49.8%) and state charges such as land tax (49.8%). Concerns about rental caps also rose to 37.1%.

“These results reflect a broader unease among investors who feel they’re being squeezed from all sides,” says Vidler. “If this trend continues, we’ll see even greater strain on the rental market, and tenants will bear the brunt.”

Fragile optimism

Despite the gloom, almost 60% of respondents still see the next 12 months as a good time to invest.

“There’s still belief in the fundamentals of property investment, but that belief is more fragile,” says Vidler.

“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.”

Originally Published : Ryan Johnson | moneymag.com.au | 17 September 2025

https://www.moneymag.com.au/why-property-investors-are-getting-out-now

“Licensed by Copyright Agency. You must not copy this work without permission.”