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Proposed changes to capital gains tax could prompt a wave of investor sell-offs, putting additional pressure on an already tight rental market, an industry body has warned.
The Property Investment Professionals of Australia (PIPA) has warned that changes to Capital Gains Tax (CGT) could push one in three investors to sell their properties, putting further pressure on the rental market.
The warning followed earlier rumours of the federal government reportedly considering changes to the CGT discount in the lead-up to the federal budget.
If applied, investors could potentially see their CGT discount halved from 50 to 25 per cent, amid mounting pressure from unions.
Currently, the CGT discount reduces the capital gain on an asset by 50 per cent for Australian residents, provided they have held the property for more than 12 months.
PIPA chair Cate Bakos said the changes to CGT could lead one in three investors to sell their properties if the reform passes.
“Our 2025 survey found that 16.7 per cent of investors had sold at least one property in the year to August – up from 14.1 per cent the year before and 12.1 per cent in 2023,” Bakos said.
“Of those who sold, 19 per cent already did so because they fear tax changes, and another 35 per cent are telling us they will walk if CGT reforms proceed, which is an extraordinary red flag for policymakers.”
Bakos said that any policy accelerating investor exit would trigger immediate and severe consequences for renters.
“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’s latest data showed that national vacancy rates remained critically low at 1.4 per cent, with Perth, Adelaide and Hobart at emergency levels, while Sydney and Melbourne continue to track well below long-term averages.
Similarly, listing numbers remain down by 11 per cent compared to January last year, underscoring the extent of structural supply tightness across markets nationwide.
“When vacancy rates are this tight, removing investors from the market is economically reckless,” she said.
SQM data also showed that rents climbed in early January, increasing 2.4 per cent over the month and 5.8 per cent annually, which Bakos said highlighted the mounting strain on household budgets.
“Investors provide more than 90 per cent of Australia’s rental homes,” Bakos said.
“If governments want a functioning rental market, they must stop treating investors as expendable because the rental system collapses without them.”
PIPA urged the government to design policies based on evidence and in consultation with the industry to avoid putting further pressure on the rental market.
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