The number of investors actively participating in the property market has fallen following changes to property taxation, with an industry leader warning the exodus could worsen.
Australia’s property investors have pulled back at the fastest rate in years, driven away from the market by the tax reforms introduced by the federal government at the May 2026 budget.
According to Property Investment Professionals of Australia (PIPA) chair Cate Bakos, the tax changes had triggered a structural shift in the housing market.
Australian Bureau of Statistics (ABS) data for the June quarter showed the largest decline in new investor loan commitments since September 2022, falling by 8.6 per cent.
“Established property investors – outside of self-managed super funds for a very brief window – have pretty much left our market since the 12th of May,” Bakos said.
“Maybe 2 per cent still exist. Aside from SMSF purchasers up to the 10th of August, the only client I’ve had any investment activity with recently was an international buyer who wouldn’t have received negative gearing anyway.”
While the data clearly showed that investors had pulled out of the market en masse, Bakos said that the full impact was still yet to come.
“This year is like no other. We’re going to see some unfortunately stunning results.”
She said that early results from PIPA’s Annual Investor Sentiment Survey indicated that many were considering pivoting away from the property market entirely.
Bakos said that rather than moving into new build, as the government intended, many investors said they would redirect to shares or superannuation, with the removal of negative gearing being the core driver.
“This isn’t about sentiment. It’s about maths. One of my clients’ potential holding costs doubled overnight once the negative gearing was axed, with their borrowing capacity slashed from $850,000 to around $530,000.”
“These numbers are not something that investors will simply get used to. Almost all simply can’t afford to invest in established property. That’s a fact.”
She said the consequences for the rental market had already begun to emerge, with vacancy rates tightening, household size increasing and more tenants displaced from inner and middle-ring locations.
“The rental crisis we’ve been talking about for the past few years is about to be overshadowed by this calamity.”
Bakos said that while a small cohort of contrarian investors could take advantage of the downturn in investment, it would not be enough to offset the broader collapse across the market.
“This is a sledgehammer to the investor market, and today’s data is the first official confirmation.”
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