Struggling landlords offload rental properties

With the number of rental properties already critically low, new research shows a surge in the sale of rental dwellings over the past 12 months.

According to the Property Investment Professionals of Australia (PIPA), 12.1% of property investors sold one or more of their rental properties in the past year. For comparison, the 2022 iteration of the Property Investor Sentiment Survey showed 16.7% of investors had offloaded one or more properties in the previous two years.

The 2021 Census showed there was 2.477 million private rental dwellings in Australia, with PIPA suggesting more than 470,000 have since been snapped up by existing homeowners or first-home buyers - not by other investors - in the last three years.

Of those that sold in the last 12 months, just 24% of houses were bought by another investor. This is compared to 33% last year.

"This all spells bad news for tenants already struggling with incredibly low levels of supply, which is putting upward pressure on rent prices. Private landlords provide the overwhelming bulk of rental properties. At a time when they are needed more than ever, it's clear that property investors are being driven out of the market," PIPA says.

While the entire country is in a rental crisis, Queensland and Victoria are likely feeling the pinch a little more as 39.8% of investors sold one or more properties in Queensland in the past year, while 31.35% sold in Victoria. Further, when asked to rank the states least accommodating of property investors, 57.4% nominated Victoria.

20% of investors sold in NSW, while all other states came in at single digits, the lowest being Tasmania at 1%.

The number one reason for selling is increased taxes, cited by 47% of investors who say reforms to levies and duties by governments make property a less attractive asset to hold.

This was followed by changes to tenancy legislation (43%), rising interest rates (40.1%), talk of rental freezes (34.6%), need to reduce total borrowings (33.1%), positive selling conditions (29.2%) and rental increase limits or caps (27.7%).

"Of those investors who sold an asset in the past year, 12.9% believe they will never purchase an investment property again. And unfortunately, in another sign of more rental stress to come for tenants, the survey found 38% of investors say it is likely they will sell within the next 12 months - up significantly from 19% in last year's survey," says PIPA chair Nicola McDougall.

"Again, the reasons investors are thinking of selling include the chance of higher taxes, levies or duties (45.2%), changing tenancy legislation (43%), and talk of rental freezes or caps (42.9%)."

Finally, while 56% of investors still believe now is a good time to invest in residential property, this is down from 58% in 2022 and down from 62% the year prior.

Of the more than 1700 investors who responded to the survey, 22% had sold three or more properties in the past 12 months. The data shows 55% of landlords in Australia own three or more properties while 23% own two.

Interestingly, while 92.4% of investors say their costs have risen over the past year, 55% of them are passing on 10% or less of these additional costs to their tenants.

Get stories like this in our newsletters.