One in three property investors say they could quit the market if the capital gains tax discount is cut, as a rate rise bites into borrowing power and rental supply fears grow.
One in three property investors are preparing to quit the market as a radical federal tax grab threatens to bridge the rental crisis.
It comes as fresh interest rate pain wipes up to $23,000 from the average family’s borrowing power.
New research from the Property Investment Professionals of Australia shows investor nerves are already influencing behaviour, even before any policy is locked in, with warnings that further sell-offs would deepen Australia’s rental crisis.
The 2025 PIPA Investor Sentiment Survey found 35 per cent of investors would stop investing in property if the capital gains tax discount were reduced to 25 per cent after 12 months of ownership.
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It also found 19 per cent of investors who sold one or more properties in the previous year said they did so because of fears around federal tax reform.
Around 51 per cent of current investors cited the same concern as a key reason they may sell in the next 12 to 24 months.
PIPA chair Cate Bakos said the figures showed pressure building beneath the surface, with renters likely to feel the consequences first if investors pulled back.
“Our 2025 survey found 16.7 per cent of investors 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,” Ms 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.”
Property Investment Professionals of Australia chair Cate Bakos says investor exits could shrink the rental pool and intensify competition for housing.
Investors on the brink: PIPA survey data shows 35 per cent of investors would stop buying if the CGT discount was reduced to 25 per cent after 12 months. Graphic: Gemini.
Ms Bakos said discouraging investors risked shrinking the rental pool at a time when vacancy rates remained tight.
“CGT is an investor issue, but the rental market impact is broader,” she said.
“If investors keep exiting, renters end up competing harder for fewer homes, and that pushes rents up.”
Even without tax changes, higher interest rates are already tightening borrowing limits for buyers.
Baseline Financial director Ari Levinson says borrowing power typically falls about 2.3 per cent to 2.5 per cent for every 0.25 percentage point rise in interest rates.
Baseline Financial director Ari Levinson said borrowing power generally fell by about 2.3 per cent to 2.5 per cent for every 0.25 percentage point increase in interest rates.
For a household earning a combined $180,000 a year and previously able to borrow about $925,000, that translated to roughly $21,000 to $23,000 being shaved off capacity, reducing it to about $902,000 to $904,000.
“That may not feel dramatic in isolation, but it can be the difference between competing confidently and missing out,” Mr Levinson said.
He said the bigger risk was the compounding effect if rates rose again.
“As a rule of thumb, if mortgage repayments take up more than 30 per cent to 35 per cent of gross household income, a household is considered to be in mortgage stress,” he said.
What one rate rise costs a family: Baseline Financial modelling shows a $180,000 household can lose $21,000 to $23,000 in borrowing power after a 0.25 percentage point increase. Graphic: Gemini.
Mr Levinson urged buyers planning to bid in coming weeks to check their borrowing limits early and avoid taking on new credit.
“Even small changes to debt levels or interest rates can materially affect approvals,” he said.
Arin Russell Property director and buyers agent Arin Russell said the immediate reaction after the rate rise had been measured, with buyers adjusting rather than abandoning plans.
“There’s definitely discussion, people are asking questions, but there’s no panic,” Mr Russell said.
Arin Russell Property director and buyers agent, Arin Russell said the immediate response to higher rates has been measured, with buyers recalibrating budgets rather than walking away.
“The most common adjustment is recalibrating borrowing capacity.
In most cases, the impact isn’t dramatic, it’s about fine-tuning rather than walking away.”
He said first-home buyers tended to be the most reactive to headlines, but confidence usually returned once they understood their numbers.
“Education makes a huge difference,” he said.
McGrath Wynnum-Manly agent Alec McEwan says investors remain active in southeast Queensland, but owner-occupiers can outbid them by paying an emotional premium.
In Queensland, McGrath Wynnum – Manly agent Alec McEwan said the CGT debate had not stopped investors competing for the right stock, with many becoming more selective rather than stepping away.
“They’re still competing strongly for the right stock,” Mr McEwan said.
“What we’re seeing more often is owner-occupiers winning properties because they’re emotional buyers, and that emotion can add a 5 to 10 per cent premium.”
Mr McEwan said some investors were treating the CGT debate as a reason to move sooner, not later, while demand across southeast Queensland remained strong.
“We are seeing investors come out of the woodwork,” he said.
“There’s still capital coming north, and local buyers are having to compete with it, which ultimately pushes prices higher.”
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