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Many would-be investors have paused their purchases.
Spooked property investors have started to abandon major housing markets in Sydney and other regions as the federal government mulls over changes to capital gains tax and negative gearing.
New figures have revealed a rapid decline in new investment activity across many areas that had, until recently, been frequent targets of investor spending.
The result has been a dramatic slowdown in the supply of new rentals at a time of still surging population growth due to migration. This has put further upward pressure on rents.
Sydney – along with Brisbane and Perth – recorded some of the biggest drops in investment activity, measured by the number of homes purchased by investors and then listed on the rental market.
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New investment activity has dropped as would-be landlords await confirmation of what changes the Albanese government will announce. Picture: Hilary Wardhaugh/Getty Images
New rental supply over the past quarter fell by over 15 per cent in parts of Greater Sydney compared to the same quarter in 2025, with the city as a whole seeing an 8.4 per cent drop in investor purchases.
The drop in investor spending across Greater Perth was 36 per cent annually and in Greater Brisbane it was about 22 per cent.
This came amid a drop in activity nationally, with the supply of new investor-owned properties decreasing by about 7.5 per cent, according to the figures from real estate analytics group FoundIt.
“Investors are getting cold feet,” said FoundIt head of research Kent Lardner.
He explained that fewer investors buying properties was the result of global economic uncertainty, interest rate hikes and fears of what shape government policy changes would take.
This included a proposal to reform capital gains tax by removing current discounts for those who sell their properties after more than a year of ownership, expected to be announced with the May Budget.
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Unit markets in areas like Sydney’s Hills District, saw a sharp drop in investor purchases.
“Veteran investors, the ones with a high net worth are still buying,” he said. “It’s the ma and pa investor that is sitting on their hands.
“Interest rates are a big factor, but there is also uncertainty about what will happen to capital gains tax and negative gearing … as investor (spending) has dropped, it’s renters that are paying the cost.”
Fewer new rentals coming to market because of a drop in investor activity, coupled with high population growth and lacklustre building activity, may have already put pressure on Sydney rents.
Data from SQM Research revealed the Sydney vacancy rate recently shrunk to 1.1 per cent, the mark of a highly competitive rental market, with rents climbing 7.4 per cent annually – double the rate of inflation.
The recent growth was off the back of rampant growth in Sydney rents of nearly 40 per cent between 2022 and 2025.
FoundIt head of research Kent Lardner said uncertainty may be causing some investors to sit on their hands.
Annual rent increases in Perth and Brisbane were 6.9 per cent and 6.8 per cent, respectively.
“If the government implements the capital gain tax changes, it’s likely rents will continue to climb well above the rate of inflation, which will be problematic,” Mr Lardner said.
Rethink Investing director Scott O’Neill said opportunities in the residential housing market were “cooked” because of the coming tax changes.
“Trying to make money or build a nest egg for retirement with multiple houses won’t be as effective anymore,” he said.
“Investors will need to turn to other (assets) like commercial real estate where there are fewer restrictions.”
Sydney-based investors Joe and Gianna Ciardi, who own nine properties, said they’re awaiting confirmation of what the changes will be before deciding how they’ll react.
Investors Joe and Gianna Ciardi, with daughter Grazia, said they didn’t want to dwell too much on speculation over the changes and what wait to see what shape they took. Picture: Jonathan Ng
“We’ll wait for the facts,” Mr Ciardi said. “I’m adamant, you don’t invest based on feelings. Strategy works when it’s driven by data and long-term thinking.”
FoundIt revealed there was a wide variance in the regions where investor spending was growing and falling:
NEW SOUTH WALES
Sydney areas with the sharpest reduction in new investor purchases were the Hills District, where new rental supply dropped 17 per cent, and the inner west and Parramatta, where the drop was 15 per cent.
WESTERN AUSTRALIA
A reduction in investor spending was even greater in Perth, where many areas saw a 40 per cent reduction in sales to investors.
The Perth-South East region recorded the largest absolute drop in the state, with investor listings dropping by 41.2 per cent.
QUEENSLAND
Investor purchases in every single region in Greater Brisbane went backwards.
Brisbane Inner City investor-held listings collapsed by 31.1 per cent, heavily impacting unit markets in Clayfield and Brisbane City.
Regional Queensland was also a major area where activity declined: Townsville plunged 43.6 per cent.
SOUTH AUSTRALIA
Adelaide saw a mild retreat in investor activity, but there was a sharp internal divide within the city.
The inner Adelaide and Hills markets shed investors the fastest, with activity dropping 19.3 per cent.
Adelaide-West bucked the trend, emerging as the only region in the city where investor activity grew, going up 11 per cent annually.
VICTORIA
Victoria was one of the few markets where investor activity picked up.
Investor purchases over the March quarter were 8.2 per cent higher than over the same period in 2025.
Melbourne saw the opposite trend to Sydney, Perth and Bribane: investor activity has risen.
Mr Lardner explained that Melbourne, and much of Victoria, had become a “value play” for experiened investors because prices were much lower than in other capitals, with room for growth.
The Latrobe-Gippsland region recorded the sharpest rise in investor spending, with investor-held rental listings growing by 103.3 per cent.
Investors added 28.7 per cent more listings in the Melbourne-West region driven by aggressive buying in affordable growth corridors like Ardeer-Albion and Burnside Heights.
– With additional reporting by Kaylee Cranley