Shortfall in rental properties highlights challenges from reduced property investments
There is an urgent need for tens of thousands of additional property investors to ease Australia’s worsening rental crisis, a new study by the Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA) has found.
According to the research, between March 2019 and March 2024, Australia’s population grew by approximately 1.8 million people, requiring an estimated 212,000 new rental properties. To meet this demand, around 145,000 additional property investors were needed.
However, Australian Taxation Office (ATO) data reveals that only 110,000 new investors entered the market in the five years leading up to 2022, leaving a shortfall of nearly 35,000 investors.
PIPA chair Nicola McDougall (pictured above left) said investor growth had historically kept pace with population increases and rental demand until recent years.
“From 2003 to 2017, the number of individual property investors grew steadily, with annual increases ranging from 56,000 to 60,000,” McDougall said. “But this trend disappeared after 2018 due to factors such as restrictive lending policies, increased market interference, new regulations, minimum standards, and higher taxes, which have discouraged investors.”
The research shows that investor growth over the five years to 2022 averaged just 22,300 annually – a 60% decline from the long-term average.
PICA chair Ben Kingsley (pictured above right) said the reduced number of investors entering the market in the past decade is a key driver of the current rental crisis.
“Critics might claim we are self-serving, but the statistics clearly show investor activity is far below the level required to house our growing population,” Kingsley said.
“Between 2015 and 2017, when investor growth was steady, the national vacancy rate was around 3%, with 70,000 to 80,000 rental vacancies available nationwide. By October this year, the vacancy rate had fallen to just 1.2%, with only about 36,000 vacancies available.”
The study also found that more investors have been leaving the market. According to the 2024 PIPA Annual Investor Sentiment Survey, 14.1% of respondents sold at least one investment property in the past year, up from 12.1% in the previous year. Around 65% of these properties were purchased by homeowners rather than other investors, further reducing the rental stock available to tenants.
“These sales are worsening the rental crisis,” McDougall said. “With fewer new investors entering the market and many existing investors selling properties, there are fewer rental homes for tenants.”
Kingsley stressed that governments need to focus on attracting and retaining property investors to help stabilise the rental market.
“It’s in the best interests of the broader economy, all levels of government, and renters to support investment in the private rental market,” he said. “Instead of disincentivising investment, governments should be encouraging it and letting these small businesses do what they do best.”
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