Rates Don’t Drive Up Rents
Rising interest rates have a minimal impact on rent increases, according to new research by the Reserve Bank of Australia.
The RBA says rents only increase by 1 cent for every $1 increase in loan repayments. Instead, property investors and landlords bear the brunt of the increasing costs.
The RBA analysed 13 years of investor tax returns to determine the impact. It says loan interest payments for investors increased by around $850 between April 2022 and January 2024, which would have raised rents by less than $10 per month, or just over $2 per week.
The RBA says it is a case of “correlation rather than causation” that rents are rising at the same time as interest rates.
It says both tend to move at the same time in the economic cycle, and while there is some link between interest rates and rent increases, it is very small.
The RBA says other factors are driving rents up, including the level of demand relative to the stock on market.
“The RBA’s assessment is that high rent growth in recent years reflects this fundamental force.
“Housing demand has been strong, supported by high population growth and increased preference for more space, while supply has been hampered by ongoing capacity constraints and increases in construction costs.”
Rising interest rates have a minimal impact on rent increases, according to new research by the Reserve Bank of Australia.
The RBA says rents only increase by 1 cent for every $1 increase in loan repayments. Instead, property investors and landlords bear the brunt of the increasing costs.
The RBA analysed 13 years of investor tax returns to determine the impact. It says loan interest payments for investors increased by around $850 between April 2022 and January 2024, which would have raised rents by less than $10 per month, or just over $2 per week.
The RBA says it is a case of “correlation rather than causation” that rents are rising at the same time as interest rates.
It says both tend to move at the same time in the economic cycle, and while there is some link between interest rates and rent increases, it is very small.
The RBA says other factors are driving rents up, including the level of demand relative to the stock on market.
“The RBA’s assessment is that high rent growth in recent years reflects this fundamental force.
“Housing demand has been strong, supported by high population growth and increased preference for more space, while supply has been hampered by ongoing capacity constraints and increases in construction costs.”