Competition in Australia’s rental market has intensified in the first month since the government announced landmark capital gains tax and negative gearing reforms in the May federal budget.
New figures revealed Australia’s rental supply has shrunk over the month at the same time that the tenant pool was estimated to have grown due to migration.
And, with long queues of tenants often the norm at weekend rental inspections, that’s given existing landlords grounds to charge more rent.
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Australia is losing rentals since Treasurer Jim Chalmers announced tax changes in the May federal budget. Picture: Martin Ollman.
The reduction in rental supply was primarily the result of a change in the replacement rate of new rentals.
Mum and dad investors often needed to sell due to divorces, death or approaching retirement and normally these sales are matched by a similar rate of new rental purchases from other investors.
That balance has disappeared. Investors sold a similar number of homes as in previous months but far fewer new rentals were purchased, resulting in a net loss of rental stock.
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Research from property analytics group FoundIt indicated there were 5447 rental home sales across the country over May and only 3915 new rental purchases.
FoundIt head of research Kent Lardner said this change over a single month was likely “just the tip of the iceberg” as many investors were still digesting the changes.
Long queues at rental inspections were already reality before the reforms were announced. Picture: Sam Ruttyn
He said it was likely the budget reforms, notably negative gearing being restricted to new builds only, would encourage more investors who would otherwise have bought homes to abandon their plans.
Mr Lardner added that over time this would put continued pressure on renters, giving existing landlords a wide berth to increase rents.
It was also unlikely that having fewer investors competing for homes would make it easier for renters to become first-home buyers because many lacked the borrowing power and deposit needed.
“If the intent is to make more renters first-home buyers, they have to be able to afford the deposit. How many can do that?
“The reality is that the trend line for wages has been very poor for years, but rents have continued to go up. This has made it harder for renters to become first-home buyers.”
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Fewer new rentals were getting bought than the number getting sold.
There was variation in how investors were responding across states.
Victoria lost more than 640 rental homes in May. The analysis revealed the exodus is set to cost Melbourne renters 1091 bedrooms across the city.
Queensland had been shedding rental supply long before the changes, with thousands of rental bedrooms vanishing across Queensland in the past three years.
FoundIt’s data, which tracked an annual market snapshot during the month of May, shows the state lost a combined 12,929 rental bedrooms across 2024, 2025, and 2026.
Last month alone, 993 Queensland landlords exited the market while only 661 new investors entered to replace them.
Sydney’s inner city saw a sharp drop in rental supply, plus rent rises. Picture: Knight Frank
Sydney had fewer rental homes than before the changes were made, with experts revealing rents were likely to continue rising.
There were close to 2,159 rental bedrooms added to the Sydney market over May, which was well below the 3,744 rental bedrooms that were lost through sales.
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