Rental Pressure Is Here With Mass Exodus!

**Sammy Gordon** (0:05)
G'day listeners and welcome back to another APS Weekly News Bulletin, keeping you up to date and well informed on the Australian property market. Guys, today I have an article here written by Alicia Capone from The Herald Sun, titled, Investor Exodus Strips Hundreds of Rental Homes from Victoria. Victoria lost 642 rental homes during May 2026, the same month the Australian government announced sweeping changes in negative gearing and capital gains tax. The new analysis revealed the exodus is set to cost Melbourne renters 1,091 bedrooms across the city. Remembering this is just for the month of May. Maroondah, Monash and Glenora council areas top the list and experts fear that with relatively high numbers of houses exiting, families needing a floor plan with more space could be facing a lockout from some of the city's most desirable suburbs. This is because the prospect of investing in the seven-figure price tax for houses dominating these areas' streets will be far less feasible under the changes to investor taxation in last month's federal budget. A research firm found its Rental Market Pressure National Report showed investors listed 1,163 former rental properties in Victoria in May whilst investors purchased 1,021 in the same time frame. This caused an overall loss of 642 rental homes across the period with a total of 1,091 bedrooms gone from Melbourne residences alone. Under the changes, home bought after 7.30pm on May 12, 2026 will only be able to claim negative gearing until July 1, 2027 The reports say that most houses not being an attractive investment when you remove negative gearing in the CGT discount, family-friendly house ceases to be an investment opportunity due to the level of negative cash flow. Property Investors Council of Australia Chair said that along with Victorian government's 150 plus rental reform introduced since 2021, the Australian government's tax changes would result in far less rental options in established areas for families. What always suggests happening is that the older investors, one who have held properties for 20, 30 years, are cashing out because of restricted nature and the increased regulation in the cost of running their private rental accommodation in Victoria is now untenable under this government, as Kingley said. So you're going to see further hollowing 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. In the article, they've quoted some private investors, wife and husband, Catherine and Nigel Jones, who told their former home-turned-investment property at Townhouse in Melbourne's Inner North earlier this month. Ms Jones said, Additional interest rate rises. The rent they were earning didn't cover the increased cost of keeping the abode under the Victorian government's legislative changes. In three to five years, it's really a tip in favour of the tenants, not the owners anymore. But we did hold it for a while because we appreciated that we had good tenants. Mr Radina, the director at Radina Real Estate, he said his agency had influx of investors putting their homes on the market priced anywhere from $400,000 to $1.5 million. We credited this to the homes owners being fed up with constantly changing Victorian rental legislation increased costs such as land tax related to investment properties, in addition to concerns about the negative gearing and CGT alterations potentially impacting the market. That'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 has had a couple of investors buy homes lately, including Ms Jones' but said they were mostly pursuing to include the homes in their self-managed super funds, mainly exempt from the negative gearing changes. Well, funny that since that's come out, that's bloody change as well. 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 would already lock 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 just vanish. Ms Beveridge says, it's often becomes a more affordable entry point for a first home buyer and 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 communities. We must actively build our way out of this availability crisis by investing heavily in private, affordable, and social housing. This is reporting by Aidan Devine. Now guys, I actually find this exceptionally funny. We must actively build our way out of this availability crisis. It's an interesting way to sort of finish the article when so much legislation has made it extremely hard to bring properties to market for such a long period of time. And then at the same time, they're literally disincentivizing investors from buying existing residential property, which is only going to further exacerbate the problem of the rental boom right now. Now, the rental pressure that's come through and is being felt in Melbourne, whilst it's only small, or we're in Victoria, whilst it's only small at the moment, I think it's only going to come through in a bigger and bigger wave. But the interesting part of the article, and the reason I wanted to bring it up, was obviously multiple people in that report quoting that existing investors are selling out. Now, if you look at an area like Melbs, you know, there obviously hasn't seen much growth, but and they've had rental reforms against them again and again. They've had new tax, land tax changes brought in as well. They're getting more and more disincentivized to hold property in the state. Let alone new investors coming in that don't even have the ability to offset their losses and the negative cash flow, negative gearing benefits that were previously there as well making it actually the ability to hold. So it'll be very interesting to watch how that happens, but I thought it was really interesting to pull that apart and actually explain those pieces because you've literally got existing investors who even though they're grandfathered under the schemes, they're fed up with the changes that have come in again and again from state government. And now we're seeing these changes come in from federal government, the fear coming into the market of a market falling that hasn't grown in a certain period of time as well. Now, if they sell out and you have first home buyers potentially buy it, that were living with mum and dad or living in co-sharing, those sorts of people buy stock, they create a new household. This isn't one household moving into one household, you're literally buying and creating a new household, which is going to increase demand and pressure on a decreasing supply of rental properties, again, at the same time as migration goes through the roof. Now, it's an interesting thing to unpack because this could be seen Australia wide, people being like, well, the market's at the top now, it's had a great run. Yes, I might be grandfathered, but if the market potentially is going to come back, maybe I'll sell out. That's something that I think a lot of people haven't weighed into the equation, whether it's a market like Melbourne that hasn't grown in a long time, well, I'm going to sell out because I don't want to potentially face a loss at the same time as all this stuff's been against me for so long, so I'm just going to cut my losses now and get out versus other areas that maybe have seen significant growth over a long period of time. Investors might be thinking the same, yeah, I'm grandfathered, but why not take the chips off the table now, bank my wins before a potential crash comes in, so many people are talking about it's going to come. It's very interesting to watch this happen, and I think it's only going to increase the demand and pressure on the rental market and see this rental boom play out. I think one of the other things to throw in there, guys, is obviously new investment into Melbourne Soft as well, as thrown in by the article, due to low yields we're seeing at the moment and high negative cash flow, that new investors can't write off any longer. This is definitely being felt Australia wide, but specifically in a state like Victoria and a city like Melbourne, where yields are notoriously light on and negative cash flow is high. Now guys, for me to summarise this whole article in one way, this to me is only the beginning. I think we're going to see this combination continue to play out. Not only are we seeing existing investors getting fearful of the market, being fed up with the market and this constant swing in the favour of the tenant over the landlord, but you're also seeing this consistent disincentivisation of people going out there and buying existing stocks. So you've got people willing to sell off, either to bank their wins or just to get out of the market, either had a gutful, also combined with people being disincentivised from buying. Again, this just keeps coming back again and again to a decrease in supply, which I believe is going to push into the next rental boom, as I've been very vocal on as well. We're seeing overall sentiment is down, meaning obviously existing investors not wanting to go out there and buy into the marketplace, obviously not wanting to carry these massive negative cash flows. The herd almost always sits on the sidelines and waits, combined with lower buy numbers. So combined with people not wanting to go out there and get into the marketplace, seeing that, this is new investors in combination with, and also people not actually being able to do it from a servicing perspective, but also from not being able to write it off, they might not actually be able to actually hold that property any longer, combined with the existing investors exiting either banking wins or cashing out and just getting out of it, whether it's a loss or a win or whatever. We're seeing a lot of that right now. What I firmly believe again to summarize this thing, being vocal about this guys, buying window ahead of this, low sentiment market doesn't last forever and it always looks like the best buy window in reverse. In that rear vision mirror, the best opportunities are only ever seen and really noticed how good they were in hindsight. So that's where I believe we're heading. That's where I believe the next three to six months, potentially 12 months has in front of us, it will be 12 months max. I believe the market will start to turn back into a running market in a lot of locations around Australia by early 2027 I believe it will be Q1 or Q2 in 2027 And I believe a little bit off the back of this continually depletion in the rental supply pipelines around Australia with the rental boom incoming. And all I can say once again, with this stuff playing out the rental pressure here, with the max exodus in place of investors, rental boom incoming, get amongst it. Guys, I hope you took some great value from that. I hope that made sense. I hope it really solidified the way we're seeing the market play out. I hope you gave confidence seeing the way everything is moving right now and that the rental boom is on its way. Firmly believe it is at the same time that we're in a great buy window combined with getting yourself ahead of the next cycle. If you took some great value from this thing, please send it on, share it with someone else who you think could also take some value from this and maybe empower them to position themselves before the next run as it comes through. But until next week, guys, that's another Weekly News Bulletin on The Scouting Australia Podcast.