Survey finds shortage of property investors driving rental crisis

A new study conducted by the Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA) has revealed a need for tens of thousands of additional property investors to address the ongoing rental crisis in Australia.

The research found that over the past five years, nearly 35,000 extra investors were required to keep up with the rapid population growth and increasing rental demand.

From March 2019 to March 2024, Australia’s population grew by about 1.8 million people, which the study found would necessitate about 212,000 new rental properties and an additional 145,000 investors to accommodate these new households.

However, the latest data from the Australian Taxation Office shows that there were about 110,000 additional property investors over the five years leading up to 2022, resulting in a shortfall of nearly 35,000 investors.

PIPA chair Nicola McDougall said investor growth had been relatively consistent with population increases and rental demand until about 2018.

“From 2003 to 2017, the number of individual property investors grew steadily, with annual increases ranging from 56,000 to 60,000.

“However, this upward trend disappeared in recent years due to factors such as increased market interference, restrictive lending policies, and new regulations, reforms, minimum standards, and tax hikes, all of which have deterred investors.”

According to the research, annual investor growth over the five years to 2022 averaged about 22,300, which is a decline of about 60 per cent compared to the long-term average.

PICA chair Ben Kingsley said the decline in investor growth over the past decade was a significant factor contributing to the present rental crisis.

“Critics might claim we are self-serving, but various statistics confirm that investor activity is far below the level needed to house our growing population.

“For instance, between 2015 and 2017, when investor growth was steady, the national vacancy rate was around three per cent, with 70,000 to 80,000 rental vacancies available nationwide, according to SQM Research.

“In October this year, the vacancy rate had dropped to just 1.2 per cent, with only about 36,000 vacancies available.”

The 2024 PIPA Annual Investor Sentiment Survey also revealed more investors sold properties over the year to August than in the previous year, with about 65 per cent of these properties being purchased by homeowners rather than investors.

“This year’s survey found that 14.1 per cent of respondents sold at least one investment property in the past year, up from 12.1 per cent last year,” Ms McDougall said.

“These properties are predominantly being bought by homebuyers, which means fewer rental properties are available for tenants, exacerbating the current situation when combined with the decrease in new investors annually.”

Mr Kingsley said it was in everyone’s best interest to encourage and support property investors to enter and stay in the market.