Investors Exit Sydney, Melbourne Apartments Amid Rising Costs

The sharp rise in holding costs and weak capital growth is pushing investors out of the Sydney and Melbourne apartment markets, potentially reducing rental housing availability.

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Pick & Scroll News
February 06, 2025

The sharp rise in holding costs and weak capital growth is pushing investors out of the Sydney and Melbourne apartment markets, potentially reducing rental housing availability. Data indicates that as landlords sell off properties, aspiring buyers may find more affordable opportunities, but rental supply could tighten.


Recent data highlights a surge in investor-owned apartments listed for sale in December across Australia’s two largest cities. Melbourne saw 8,300 investor properties on the market, a 6.6% increase from the previous year and 14% above the 5-year average. In Sydney, over 6,000 ex-rental properties were listed, climbing 1.7% year-on-year and 2.8% above the 5-year trend.


Apartment price growth in both cities has lagged behind other major markets. In 2024, Sydney apartments saw just 1.8% growth, while Melbourne values declined by 3%. By contrast, property prices in Brisbane, Adelaide and Perth surged by between 16.6% and 22.7%. Slower rental demand has also impacted returns, with Melbourne rents dipping 0.5% and Sydney rents declining 0.2% year-over-year.


Changing regulations and rising mortgage costs seem to be accelerating the trend. In Victoria, increased property taxes and stricter rental laws have placed additional financial strain on landlords, while higher interest rates have widened the gap between rental income and mortgage repayments. For example, Melbourne investors face a $292-a-week cash flow shortfall on average, while Sydney landlords need to cover a $611 weekly gap.


The shift in investor behaviour could reshape the Sydney and Melbourne property landscapes. While declining prices improve affordability for prospective homeowners, many of the units entering the market may not align with buyer preferences. With landlords offloading underperforming assets, supply constraints could emerge in the rental sector, affecting tenants over the long term.