Victoria lost over 24,000 rentals during 2024 — or 3.6 per cent of the state’s entire rental stock — as an investor sell-off gained pace.

The number of active rental bonds (a proxy for the number of rental properties in a market) fell from 674,462 in December 2023 to 649,978 in December 2024.

While investors put the sell-off down to unfriendly policy and tax settings from the Victorian government, the market shift has proven a boon for homebuyers.

First homebuyer Brett Gavaghan, 35, believes he was one of the beneficiaries.

He and his partner Jennifer Dawkins are about to settle on a home in Pascoe Vale South after 10 months of searching.

“I’m feeling really good, such a sense of relief actually,” he said.

“I was maybe fading with energy and motivation after a really long time searching for something that maybe didn’t exist in our price bracket.”

Over the Christmas break, Mr Gavaghan said lots of agents were telling him they had investor clients gearing up to sell in the new year, and he had noted when he went for a property, it was not investors he was competing against.

“Every time we went to auction and missed out it was either to first homebuyers or upgraders,” he said.

“I understand a lot of investors went outside of Victoria for the last few years.”

Antoinette Sagaria, director of property at mortgage brokerage Entourage, said she would not assume investors were selling off and first homebuyers were direct beneficiaries.

“There is some of this of course, but the decrease in bonds demonstrates investment properties are not coming back to the rental market, not necessarily that they are being all sold off,” she said.

Cotality (formerly CoreLogic) research director Tim Lawless said Australian Bureau of Statistics data did suggest first homebuyers were better off in Victoria than elsewhere.

“First homebuyers comprised a higher portion of lending volume in Victoria than any other state or territory in Q4 last year, at 28.9 per cent,” he said.

Warnings of rental rises haven’t hit yet

There had been warnings that falling rental stocks would lead to higher rents.

This had not occurred yet.

Data from Cotality showed rents increased 2.5 per cent state-wide in the year to April, well below the 8.6 per cent they rose the year before.

“Even though bonds held are falling, it seems to be happening alongside a fall in rental demand, which is why we are seeing some easing, if not downwards pressure, on rents themselves,” Mr Lawless said.

He said rental vacancy rates — an indicator of the balance between supply and demand — showed less than 2 per cent of rentals sat empty.

“That’s still definitely a tight rental market,” he said.

Stable rent prices might reflect demand going down in unison with supply, as homebuyers snapped up ex-rentals — or that the market had already hit a ceiling of what renters could afford.

Lawless said the latter might lead to a “restructuring of the market”.

Market hits ‘equilibrium’

Property Investment Professionals of Australia director Cate Bakos said demand and rental price data suggested the market had hit an equilibrium of supply and demand.

“We had very aggressive rental price growth in the years coming out of COVID and it’s stabilised now,” she said.

The active bond data was current to the end of December, and Ms Bakos did not believe the sell-off would persist, with investor interest returning in 2025, coaxed by the prospect of capital gains after a long period of comparatively poor performance.

“I have been absolutely flat-out with investor activity from interstate,” she said.

Ms Bakos said the main driving force behind the sell-off was an increase in compliance, which had left investors feeling they had lost control of their asset, and added costs as they were required to certify gas and electrical systems every two years.

Interest rates were the second biggest driver of investors selling, and the third was an increase in land taxes for investors.

She said changes to zoning and building rules in activity centres showed the Victorian government was taking notice of housing shortages, and reducing red tape would help add to supply.

However, Ms Bakos said the state government was “way too late”.

“Our state sat back and allowed this to become a big burning issue, and now they are panicking about it.”

Metro landlords selling the most

Rental bond numbers began falling in mid-2023. Since then Victoria has lost over 27,800 rentals,  according to data from the Department of Families, Fairness and Housing.

The sell-off has been quicker in metro areas, where rental stocks fell just over 4 per cent in 2024, compared to the 1.4 per cent fall in regional areas.

Housing is likely to remain central to political agendas, with a recent report revealing Victoria needed an extra 80,000 social housing homes in the next decade to get the state back on track.

After nine years working abroad and living as a renter, Brett Gavaghan said buying a home made him feel like he had caught up to where he wanted to be.

He said Australia should treat housing less as an investment.

“I think there’s probably a balance… I don’t think investors need to have five and 10 properties,” he said.

Originally Published: Geraden Cann | ABC News | 13th May 2025

https://www.abc.net.au/news/2025-05-13/rental-bonds-victoria-investor-selloff/105283014

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