For decades, the Australian rental market has been built on the backs of everyday investors — the traditional “mum and dad” landlords.
These are teachers, tradespeople, professionals and small business owners who purchased one or two investment properties as a way to build long-term financial security and support their retirement.
To understand the scale of this market, it is worth looking specifically at residential rentals.
According to the 2021 Australian Census and Australian Taxation Office data, Australia has approximately 2.9 million residential rental dwellings.
These homes are rented by around 31% of Australian households, making renting a major component of the national housing system.
Importantly, the vast majority of these rental homes are not owned by corporations.
They are owned by individual investors.
Data from the Australian Taxation Office shows there are approximately 2.24 million individual property investors in Australia. These investors overwhelmingly hold small portfolios.
The ownership breakdown looks like this:
| Number of Properties Owned |
Percentage of Investors |
Approximate Number of People |
| 1 Property |
~71.5% |
~1.6 million |
| 2 Properties |
~18.9% |
~423,000 |
| 3 Properties |
~5.8% |
~130,000 |
| 4 Properties |
~2.1% |
~47,000 |
| 5 Properties |
~0.9% |
~20,000 |
| 6 or More |
~0.8% |
~19,000 |
In practical terms, this means over 90% of investors own just one or two properties.
Collectively, these “mum and dad” investors supply around 90% of Australia’s residential rental housing.
The same pattern exists in New South Wales, which has the largest rental market in the country.
NSW currently has approximately 1.1 million residential rental dwellings, representing roughly one third of Australia’s entire rental housing stock.
Sydney alone accounts for the majority of these properties, with rental housing heavily concentrated across apartment-rich suburbs such as Bondi Junction, Parramatta, Mascot, Chatswood and Green Square.
For decades, this system — supported by negative gearing and the capital gains tax discount — has formed the backbone of Australia’s private rental market.
However, as we move through 2026, a structural shift is beginning to reshape the landscape.
Government policy is increasingly encouraging large institutional investors through the Build-to-Rent (BTR) sector, offering tax concessions and incentives that individual investors simply do not receive.
The question many smaller investors are now asking is straightforward:
Why is the government rolling out the red carpet for large corporate landlords while tightening the rules for individual investors?
What Is Build-to-Rent?
Build-to-Rent developments are residential buildings designed specifically for long-term rental rather than individual sale.
Instead of selling apartments to individual buyers, the entire building is owned by a single institutional investor, such as:
• Pension funds
• Insurance companies
• Global real estate funds
• Sovereign wealth funds
The building is then professionally managed as a long-term rental asset.
This model has been common in parts of Europe and the United States, but historically it has been relatively limited in Australia.
That is now beginning to change rapidly.
The Tax Incentives Driving the Shift
To encourage large-scale rental construction, governments have introduced tax incentives that largely apply to Build-to-Rent developments.
| Incentive |
Level |
Impact on Corporations |
Availability to Individuals |
| Land Tax Concessions |
NSW State |
Land tax reductions for qualifying BTR developments |
Not available |
| Accelerated Depreciation |
Federal |
Construction depreciated at 4% per year (25 years) |
Standard 2.5% over 40 years |
| MIT Withholding Tax |
Federal |
Foreign investors taxed at 15% on rental income |
Individuals taxed up to 45% + levy |
| Foreign Investor Surcharge Relief |
State Level |
Potential relief for BTR projects |
Not available |
For large institutions deploying hundreds of millions of dollars into housing, these incentives significantly improve the internal rate of return on new developments.
Why Governments Are Supporting Build-to-Rent
While this policy direction may appear unfair to individual investors, governments are pursuing several broader objectives.
1. Increasing Housing Supply
Australia faces a significant housing shortage.
The Federal Government has committed to delivering 1.2 million new homes by 2029.
Most individual investors buy existing homes, which does not increase housing supply.
Build-to-Rent developments, by contrast, can deliver hundreds of new rental homes in a single project, making them an effective tool for increasing housing supply.
2. Greater Rental Stability
Governments are increasingly focused on tenant security.
A private landlord may sell the property, move back in, or redevelop it.
Build-to-Rent operators typically must hold their buildings for at least 15 years to maintain tax concessions, creating longer-term rental stability.
3. Affordable Housing Requirements
Many Build-to-Rent projects must allocate around 10% of apartments as affordable housing.
These units are typically rented at below market rates, helping governments increase affordable housing supply without fully funding new social housing.
Meanwhile, Individual Investors Face Increasing Pressure
While institutional investors are receiving incentives, individual investors have faced tightening conditions.
Lending Restrictions
Bank regulators have introduced stricter lending rules for high debt-to-income borrowers, affecting many property investors.
Land Tax Changes
Several states have tightened land tax thresholds, meaning more investors now pay land tax on properties that were previously exempt.
Ongoing CGT Debate
There is also continuing political discussion about possible changes to the 50% capital gains tax discount, although no formal changes have been announced.
Who Has the Advantage?
From a tax and financing perspective, institutional investors currently hold structural advantages.
Their projects benefit from:
• Lower effective tax rates
• Accelerated depreciation
• Land tax concessions
• Access to global capital markets
However, individual investors still have one key advantage:
Flexibility.
A private investor can:
• Sell when market conditions suit
• Renovate to increase value
• Move into the property if needed
• Adjust their strategy quickly
Institutional Build-to-Rent funds are typically locked into long-term holding structures.
The Bigger Picture
Australia’s rental market is evolving into a two-tier system.
On one side will be institutional Build-to-Rent developments delivering large purpose-built rental buildings.
On the other side will remain the traditional mum and dad investor, who continues to own the majority of existing rental housing.
Rather than replacing individual investors, Build-to-Rent is likely to become a parallel rental sector operating alongside the traditional one.
