Victoria lost 642 rental properties during May 2026, a new report from research firm and property platform FoundIt shows.
Victoria lost more than 640 rental homes in May, the same month the Australian government announced sweeping changes to negative gearing and capital gains tax.
New analysis has revealed the exodus is set to cost Melbourne renters 1091 bedrooms across the city.
Boroondara, Monash and Glen Eira council areas topped the list and experts fear that with relatively high numbers of houses exiting, families needing a floorplan with more space could be facing a lock out from some of the city’s most desirable suburbs.
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This is because the prospect of investing in the seven-figure price tags for the houses that dominate these areas’ streets will be far less feasible under the changes to investor taxation in last month’s federal budget.
Research firm and property platform FoundIt’s Ex-Rental Market Pressure National Report showed investors listed 1663 former rental properties in Victoria in May, while investors purchased 1021 properties in the time frame.
This caused an overall loss of 642 rental homes across the period, with a total 1091 bedrooms gone from Melbourne residences alone.
Boroondara, Monash, Glen Eira, Melbourne City and Port Phillip were the top areas in Victoria where former rental properties were listed for sale, in May 2026.
FoundIt head of research Kent Lardner says that across Australia, there will be many suburbs where rental stock may become so tight that tenants will be pushed out of their area.
Across Boroondara, Monash and Glen Eira, a combined 221 former rental homes with 581 bedrooms between them were put on the market.
The report stated that with median house prices ranging from $1.31m to $2.67m for the three areas, households squeezed out of leases would be “well short of affording to buy” in most cases.
FoundIt head of research Kent Lardner said rental supply in much of the country was already shrinking before May’s federal budget changes and that the trend would accelerate in the coming months.
This two-bedroom unit at 9/38 Livingstone Close, Burwood, is for sale with a $700,000-$770,000 range. The home’s owner lived there before moving to a larger home, while maintaining the unit as an investment property.
Property Investors Council of Australia chair Ben Kingsley says that operating private rental accommodation in Victoria is now “untenable” thanks to increasing state government regulations.
Under the changes, homes bought after 7.30pm on May 12, 2026, will only be able to claim negative gearing until July 1, 2027, with some exceptions such as new builds.
And the 50 per cent CGT discount for investment properties owned for more than a year will be replaced by indexation and a minimum 30 per cent tax rate.
Mr Lardner said many of Melbourne’s most desirable locations would continue to see a reduction in family-friendly rentals.
“Typically the higher yielding stuff is one- and two-bedroom units, but when it comes to houses, once you go above $1m, two third of investors disappear,” Mr Lardner said.
“Most houses are not an attractive investment – when you remove negative gearing and the CGT discount, a family-friendly house ceases to be an investment opportunity.”
This Rowville house, a rental property, sold for $1.1m in April 2026.
Prime Minister Anthony Albanese’s government delivered a budget containing major changes to the nation’s negative gearing and capital gains tax systems, in May 2026. Picture: Dan Peled/NewsWire.
Property Investors Council of Australia chair Ben Kingsley said that along with the Victorian government’s 150-plus rental reforms introduced since 2021, the Australian government’s tax changes would result in far less rental options in established areas for families.
“What I would suggest is happening is that the older investors, the ones who have held properties for 20-30 years, are cashing out because of the restrictive nature and the increased regulation and the cost of running their private rental accommodation in Victoria that’s now untenable under this government,” Mr Kingsley said.
“So you’re going to see a further hollowing out of these established markets and
families won’t have choices in terms of better schools, if they want to choose to rent in those areas.”
He also warned that rents would increase in these markets as demand exceeded supply.
Across Australia, 6102 former rental homes were listed for sale in May 2026.
Tenants Victoria chief executive Jennifer Beveridge says tat rising rents and a tightening in the supply of rental homes has locked families out of too many parts of the state.
Wife and husband Catherine and Nigel Jones sold their former home turned investment property, a townhouse in Melbourne’s inner north, earlier this month through Rendina Real Estate director Lou Rendina.
Ms Jones said in addition to interest rate rises, the rent they were earning didn’t cover the increased costs of keeping the abode under the Victorian government’s legislation changes.
“In three to five years it’s really tipped in the favour of the tenants, not the owners anymore,” Ms Jones said.
“But we did hold it for a while because we appreciated that we had good tenants.”
This three-bedroom rental house in Mulgrave changed hands for $1,005,000 in April 2026.
Mr Rendina said his agency had seen an influx of investors putting homes on the market, priced from $400,000 to $1.5m.
He credited this to the homes’ owners being fed-up with constantly-changing Victorian rental legislation and increased costs, such as land tax, related to investment properties – in addition to concerns about the negative gearing and CGT alterations.
“It’s sad because we’re seeing rent rolls diminishing because there are less rentals and they’re certainly not all being bought by investors,” he said.
He has had a couple of investors buy homes lately, including Ms Jones’, but said they were mostly purchasing to include the homes in their self-managed super funds, meaning they will be exempt from the negative gearing changes.
in Mooroolbark, this townhouse, a rental home, sold for $735,000 in June 2026.
Fletchers’ partner Sarah Lowry, who covers Boroondara, noted interstate-based buyers were showing plenty of interest in Victoria.
“I think for investors, it’s the numbers game, and if the numbers work out for them, they’re really happy to invest in Victoria,” she said.
Ms Lowry said that investors were often interested in properties at the lower end of the price spectrum, such as a one-bedroom Glen Iris apartment she recently listed for $300,000 to $330,000.
Others are originally from Melbourne or planning to return to the city in the future.
Some of these buyers purchased a house with the intention of leasing it out for a year or so before moving in themselves, she added.
FoundIt’s Ex-Rental Market Pressure National Repotr shows that a total 17,501 bedrooms were withdrawn from the Australian rental market in May, 2026.
Tenants Victoria chief executive Jennifer Beveridge said that renters across the state were already facing skyrocketing rents and a tight supply of rental homes, which had already “locked families out of too many parts of Victoria”.
“If a landlord sells a family home because they can’t maintain it, that property doesn’t vanish,” Ms Beveridge said.
“It often becomes a more affordable entry point for a first-home buyer, or an opportunity for a new owner to bring it up to standard.”
Ms Beveridge said Australia needed a housing system that allowed people to rent where they work, study and have established their community.
“We must actively build our way out of this availability crisis by investing heavily in private, affordable, and social housing,” she added.
Additional reporting by Aidan Devine
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