Investor Selling Hits Record High as Tax Reforms Take Hold
A record 18.3% of property investors sold at least one holding in the past year as negative gearing reforms become law and cash flow turns negative for most.
The first national read on investor behaviour since Australia's negative gearing and capital gains tax reforms became law has landed, and the numbers are stark. PIPA's 2026 Annual Investor Sentiment Survey — conducted in August among 626 property investors drawn from PIPA, PICA, and client databases — reveals that 18.3 per cent of respondents sold at least one investment property in the year to August. That's a record high, up from 16.7 per cent in 2025 and 14.1 per cent in 2024, marking three consecutive years of escalating exits.
As reported by The Adviser, PIPA chair Cate Bakos said the results confirm what investors had been warning for years. "Last year, investors told us they would walk away if these reforms became law. This year's survey is the first national read by PIPA since the changes were legislated, and it shows a lot of them are doing exactly that."
The Cash Flow Squeeze Is Real and Getting Worse
Cash flow is at the centre of the problem. Nearly two-thirds of respondents — 62.3 per cent — said their investment properties were running at negative cash flow at the time of the survey, up from 56 per cent a year earlier and more than double the 30 per cent low recorded in 2022. Within that group, 8.8 per cent were drawing on savings to bridge the shortfall, while 41.5 per cent described their cash flow as tight.
The cost escalation driving this is broad-based. Some 41.7 per cent of investors said expenses — land tax, compliance and minimum-standard costs, insurance, property management — had risen by between 11 and 20 per cent over the past year, up from 39 per cent in 2025. More than 15 per cent reported cost growth of between 21 and 40 per cent.
"Investors are not selling because they think it is a smart time to sell," Bakos said. "Many are selling because the numbers no longer work for them. Increased holding costs, including higher interest rates, land tax and compliance costs are stretching investor capacity to financial discomfort."
Only 7.6 per cent of respondents believed it was a good time to sell, down sharply from 36 per cent last year — meaning most who are selling are doing so out of necessity rather than choice.
Rental Supply Is Being Squeezed From Multiple Directions
Where those investment properties are ending up matters as much as the fact of the sales. More than half of sellers — 51.6 per cent — said at least one property had been sold to an owner-occupier, up from 37 per cent last year. A further 12.4 per cent sold to a first home buyer. Rental housing stock is converting to owner-occupied stock at pace.
Almost one in ten investors — 9.7 per cent — had already withdrawn at least one property from the long-term rental market, and 82 per cent expected the reforms to reduce rental supply in their local area.
The reforms, which passed into law in June, restrict negative gearing to new builds from 1 July 2027 and replace the capital gains tax discount with cost-base indexation for assets held more than 12 months. Properties purchased before 12 May 2026 are grandfathered under the old rules. As Australian Broker reported this week, citing Ray White Group head of research Vanessa Rader, the policy was designed to redirect investor demand into new housing supply — but in many regional towns that new supply simply doesn't exist, leaving established property as the only investable option and shielding existing holders from future competition.
What This Means If You're Still Considering Property Investment
Forward-looking sentiment has deteriorated significantly. Just 44.1 per cent of respondents said the next twelve months represented a good time to invest in residential property, compared with almost 60 per cent last year. Only 27.8 per cent said they intended to purchase another investment property in future, down from 41 per cent in 2025. Of those with no plans to buy again, 63 per cent attributed that decision directly to the negative gearing and CGT changes.
The policy's intended shift toward new construction hasn't materialised at scale: only 4.8 per cent said they were more willing to buy new builds as a result of the reforms, while 50.7 per cent still preferred established dwellings.
For investors still in the market, the immediate priority is the cash flow position. If refinancing to a lower rate on your investment loan could meaningfully reduce your monthly shortfall, that's worth modelling — the refinance savings calculator gives you a quick read on the potential benefit.
For owner-occupiers and first home buyers watching this play out, the exit of investors from some markets is creating listing stock that wasn't there twelve months ago. It's worth monitoring your target area.
Trust in property tax settings has taken a significant hit. PIPA found 87.2 per cent of investors were not confident that future governments would maintain stable and predictable settings — with 50.4 per cent not confident at all. As Bakos put it: "Once trust in the stability of the tax system is gone, it is extraordinarily hard for the government in power to win that trust back."
*Source: The Adviser, 15 September 2026*