In May 2026, landlords sold 5,447 rental homes across Australia. In the same month, just 3,915 properties were bought to be rented out. That is a net loss of more than 1,500 rentals in four weeks, according to research firm FoundIt, whose head of research Kent Lardner called the numbers "just the tip of the iceberg".
Whether you cheer or wince at that depends on which side of the fence you sit on. Buyers get more stock and fewer investors bidding against them at auction. Renters get a smaller pool of homes in a market that was already painfully tight. Here is why landlords are selling, what it means for both camps, and where the 2026 investor exodus story gets oversold.
Why landlords are selling
No single policy caused this. Several pressures landed at once and changed the arithmetic of owning a rental.
The maths stopped working
Start with the gap between what a rental earns and what it costs to hold. Cotality's May 2026 Home Value Index report puts average investor mortgage rates around 6.3%, after the Reserve Bank's May hike took the cash rate to 4.35%. Against that, Cotality measures national gross rental yields at about 3.6%, with the combined capitals at 3.5% and Sydney the skinniest of all at 3.2%.
Borrow at 6.3% to earn a gross 3.2% and the rent does not come close to covering the interest, let alone maintenance, insurance and strata fees, which Cotality notes have also risen substantially in recent years. Negative gearing made that shortfall bearable by turning it into a tax deduction against wages. Which brings us to the second pressure.
Then the tax settings moved
The Federal Budget handed down on 12 May 2026 announced that negative gearing will be limited to new builds from 1 July 2027, with the flat 50% capital gains tax discount replaced by an indexed approach and a minimum 30% rate on gains. Existing holdings are grandfathered under the announced policy. We unpack the package in our guide to the negative gearing and CGT changes, so the short version will do: from mid-2027 the tax case for holding an established rental at a loss gets materially weaker, and some investors have decided to sell while prices still remember their peak. The pressure had been building for years through the housing tax reform debate.
State taxes are biting too, hardest in Victoria. The state cut its general land tax threshold from $300,000 to $50,000 from the 2024 land tax year under its COVID debt repayment plan, so a landlord with $250,000 in taxable landholdings who paid nothing in 2023 now pays $975 a year, per the State Revenue Office of Victoria. FoundIt's May figures show Victoria lost more than 640 rental homes in that single month.
The lending data confirms the pullback
New investor lending is rolling over. The ABS Lending Indicators for the March quarter 2026 show new investor loan commitments fell 5.3% in the quarter to 57,342 loans, with the value down 3.0% to $41.5 billion. CommBank's June 2026 housing outlook expects new investor lending to fall sharply across 2026, with volumes around half of late 2025 levels. On the ground, Ray White's Neoval data shows rental listings fell in every capital city in May, and Sydney's rental stock is down 9.8% over the year.
The market landlords are selling into
Selling is one decision. Selling into a downturn is another, and that is now the backdrop. Cotality's July 2026 Home Value Index shows national values fell 0.7% in the month, the largest monthly drop since December 2022, leaving the index below its March 2026 peak after annual growth had crested at 10% in February.
| Market | July 2026 change (Cotality) |
|---|---|
| Sydney | Down 1.4% |
| Melbourne | Down 1.2% |
| Brisbane | Down 0.6% |
| Adelaide | Down 0.2% |
| Perth | Up 0.1% |
| Combined regionals | Down 0.2% |
| National | Down 0.7% |
The regions have joined in: the combined regionals' 0.2% fall in July was the first since January 2023, although regional SA rose 1.4% and regional WA 0.9%. Capital city auction clearance rates have held below 50% since late May, and total capital city listings sit 5.7% above the five-year average on Cotality's count, so buyers are choosing from more homes while fewer people bid against them.
One detail matters more than the headline number. The expensive end is doing the falling. Cotality's figures show upper quartile values dropped 3.2% over the three months to July while the lower-priced tier gained 0.3%. Affordable homes, exactly the kind investors tend to own, are holding their value because that is where the remaining demand is crowded.
What the sell-off means for buyers
More stock, and it skews affordable
When landlords sell, they mostly sell units and modest houses in the middle and lower price brackets, which is precisely where first home buyers shop. FoundIt data reported by MacroBusiness shows former rentals made up about 21% of homes listed for sale in Sydney and Melbourne in May 2026. If you have spent two years losing auctions for entry-level stock, this is the first genuinely useful supply shift you have seen.
It also explains the two-speed quartile data above. Investor-grade property keeps finding buyers because owner-occupiers, many using the expanded First Home Guarantee, are stepping into the space investors are vacating. Fewer landlords does not mean no competition, just different competition.
What to check when buying a tenanted property
A decent share of ex-rentals come to market with the tenant still in place, and that changes your checklist.
- Lease in place or vacant possession. A fixed-term lease generally survives the sale. Buy with eight months left on the lease and you are the landlord for those eight months, on the existing terms. If you need to live in the home, your contract must provide for vacant possession at settlement, and the seller must be able to lawfully deliver it, which depends on the lease and state notice rules.
- Notice rules vary by state. How much notice a tenant must receive when a property sells, and the grounds on which a tenancy can end, differ across the country and have tightened recently in several states. Check with the tenancy authority in the state you are buying in rather than assuming.
- Inspecting a tenanted home. Tenants are entitled to notice before inspections, so access can be slower and listing photos may be years old. Build that into your timeline rather than skipping the building and pest report.
- Scheme rules still apply. The First Home Guarantee is an owner-occupier scheme that requires you to move in within six months of settlement, so a long fixed-term lease can rule a property out entirely.
- The finance angle. Lenders price owner-occupier and investor loans differently, and a tenanted purchase can settle as one and convert to the other. A mortgage broker can structure the loan around your actual plan for the property.
Why ex-rentals often price realistically
Investors sell differently from owner-occupiers. There is no emotional price anchored to twenty Christmases in the kitchen, and many long-term landlords are sitting on years of gains, so they can meet the market and still walk away well ahead. Add the 1 July 2027 start date for the announced tax changes and a fair chunk of these vendors are motivated in a way spring sellers rarely are.
Not every ex-rental is a bargain, though. Some carry years of deferred maintenance, and a worn rental on a weak street is cheap for a reason. Our guide to buying in a falling market covers the tactics, and a buyer's agent matched through GoMatch can tell you whether that tired ex-rental is an opportunity or a money pit, then negotiate like someone who knows the vendor has a deadline.
What the sell-off means for renters
The pool is shrinking while demand is not
Every rental sold to an owner-occupier is a home subtracted from the rental pool, and the FoundIt numbers suggest that happened more than 1,500 times in May alone. The pool those renters compete for remains extremely tight: SQM Research measured national vacancy at just 1.3% in June 2026, with fewer than 40,000 vacant rentals nationwide, while Cotality had it at 1.5% in May, matching the record lows of 2022 and 2023.
Rents are responding the way you would expect. Cotality's rental index shows national rents rose 5.9% over the year to May 2026, the fastest annual pace since the year ending September 2024, and annual growth was still running near that pace in June. Cotality research director Tim Lawless notes renters are now dedicating around a third of their pre-tax income to rent, with the cost of renting up about $204 a week over the past five years. There is a ceiling somewhere. The market has not found it yet.
If your landlord sells, know your rights
A sale does not automatically end your tenancy. As a general rule across Australia, a fixed-term lease continues and the buyer becomes your landlord on the same terms. Notice periods, grounds for ending a periodic tenancy, entry for open homes and compensation all vary by state, and several states have strengthened tenant protections over the past two years.
Keep everything in writing from the moment the agent mentions a sale, and confirm your exact rights with your state tenancy authority, such as NSW Fair Trading, Consumer Affairs Victoria or Queensland's Residential Tenancies Authority, before you agree to anything.
Is the investor exodus overstated?
Partly, yes. MacroBusiness argued in May 2026 that the exodus story confuses selling with shrinking: the same FoundIt research shows ex-rentals at about 21% of Sydney and Melbourne listings while investors own roughly 27% of occupied housing, so investors were slightly underrepresented among sellers. The ABS March quarter data also shows investor loan numbers still 18.8% higher than a year earlier even as the quarterly trend turned down, with the investor share of new lending near decade highs.
Supply is arriving from a new direction as well. BDO's tracking of the build-to-rent sector, reported by Mortgage Professional Australia, puts the national pipeline at about 51,000 apartments worth just over $40 billion, up from 39,300 apartments a year earlier. Institutional landlords will not replace mum and dad investors one for one, but the build-to-rent boom is a genuine offset for renters in the inner and middle rings of the big cities.
The banks are a moderating voice too. CommBank's June 2026 outlook has national prices flat across 2026, downgraded from 3% growth, with the announced tax changes trimming values by just under 5% over time and a lift pencilled in for 2027. On their numbers this is a repricing, not a rout. And for investors who hold on, expanding yields and thinner competition quietly improve the entry maths, a theme we explore in wealth creation through property.
FAQ: the 2026 investor exodus
Should I wait for more ex-rentals to hit the market before buying?
More investor stock is likely to list ahead of the 1 July 2027 tax start date, so supply should stay healthy into next year. The catch is that the affordable end is not falling: Cotality's data shows the lower-priced tier rose 0.3% over the three months to July even as the top end dropped 3.2%. If a suitable home appears at a fair price, buying against fewer investors now may beat waiting for a discount that never reaches your bracket.
Can my landlord end my lease just because the property is being sold?
Generally not during a fixed term. The lease survives the sale and the buyer becomes your landlord on the same conditions. On a periodic agreement, a sale can be a valid ground for ending the tenancy with proper notice in most states, and the required notice varies, so confirm your situation with your state tenancy authority before agreeing to move out.
Do the negative gearing and CGT changes apply to properties people already own?
Under the announced policy, no. Existing investment properties, and those under contract before Budget night on 12 May 2026, keep the current negative gearing and CGT treatment. The changes are announced measures rather than settled law, so the fine detail can still shift as legislation moves through Parliament.
Will rents keep rising through 2026?
The pressure points that way. Cotality expects upward pressure on rents to persist while vacancy sits near record lows, and every ex-rental bought by an owner-occupier shrinks the pool a little further. Relief is more likely to come from build-to-rent completions ramping up over the next few years than from anything on the immediate horizon.
Where this leaves you
The investor exodus is real, but it is happening one settlement at a time, not in a rush for the exits. Landlords staring at 6.3% mortgage rates, yields near 3.5% and a less generous tax future are selling in numbers that clearly show up in the rental data, while other investors keep buying and institutions build apartments behind them.
If you are buying, conditions have not lined up like this since 2022: more stock, softer prices and vendors with a tax deadline. If you rent, the squeeze will probably get worse before new supply eases it, so learn your rights before the sale sign goes up. Neither situation rewards waiting for perfect clarity, because the 1 July 2027 date is already moving the market.
Sources
- Cotality, Home Value Index, July 2026 results (national and capital city changes, quartile performance, clearance rates, listings), August 2026.
- Cotality, Home Value Index report, May 2026 (rents, vacancy, gross yields, investor mortgage rates, cash rate), June 2026.
- Australian Bureau of Statistics, Lending Indicators, March quarter 2026, May 2026.
- Commonwealth Bank, "Housing market faces multiple headwinds as price outlook downgraded", June 2026.
- FoundIt research and Ray White Neoval data, reported in "Rental market tightens as landlords head for the exits", Australian Property Update, 2026.
- SQM Research, national residential vacancy rates, June 2026.
- State Revenue Office of Victoria, land tax current and historical rates, 2026.
- MacroBusiness, "Property investors are buying more, not exiting", May 2026.
- BDO build-to-rent sector research, reported by Mortgage Professional Australia, 2026.
- Australian Government, 2026-27 Federal Budget housing tax measures, May 2026.
