Residential Property

Inflation increase outstrips rent rises

inflation rent

Inflation has increased at twice the rate of rent rates over the past decade, forcing property investors to leave the sector.

Rent has increased at only half the rate of inflation for the past 10 years, with the growing gap undermining the provision of rental properties, according to property investment bodies.

Research released by the Property Investment Professionals of Australia (PIPA) and Property Investors Council of Australia (PICA) found that while rent had increased by an average of 11 per cent nationally over the decade since June 2012, inflation had risen by 25.6 per cent over the same period.

The research, compiled by property academic Peter Koulizos and based on the Australian Bureau of Statistics Consumer Price Index from June 2012 to June 2022, showed rent increased by about 1 per cent a year compared to inflation, which rose at more than 2 per cent each year over the decade.

On a per capital city basis, rent in Brisbane, Sydney and Melbourne rose around 12.5 per cent, close to half the rate of inflation over the 10-year period, while Adelaide and Canberra rose at higher rates, 16.7 per cent and 15.6 per cent, respectively.

Hobart was the only capital city to see rent increase beyond the level of inflation at 37.9 per cent, while Perth and Darwin saw rents decrease by 2.7 per cent and 5.9 per cent respectively.

“As well as their cash flow taking a hit because of this income versus inflation imbalance, investors have also had to finance a huge variety of additional costs levied by all levels of government over the past decade,” Koulizos said.

“Governments deserted the supply of affordable rental properties years ago, expecting private investors to simply take over this responsibility, however, more and more investors are deciding that it’s just not worth it.”

PIPA chair Nicola McDougall acknowledged property investors had been under pressure since lending restrictions were introduced in 2017, which had been exacerbated by COVID-19.

“Since the start of the pandemic, investors were initially asked to ‘take one for the team’ and supply free or low-cost housing to their tenants [and] are continually expected to pay higher costs for everything property related – from council rates to stamp duty,” McDougall said.

“It’s little wonder that we have heard of investors selling their properties in droves over the past two years because many have simply had enough.”

PICA chair Ben Kingsley pointed out rental property owners had carried the burden of rising interest rates, new tenancy reforms, eviction moratoriums, land tax reforms and delays in tribunal dispute hearings while governments had continued to cut funding for public housing.

“The current rental crisis is the result of government inaction and market interventions. There is no question that governments, at all levels, have played the biggest role in the rental supply mess – but, year after year, they expect private rental providers to simply pay more and more,” Kingsley noted.

“We just pray they wake up to themselves and start valuing the vital role that mum and dad investors play in the provision of housing in this country – or step up to the plate and come up with a viable and achievable plan to greatly increase the supply of rental properties in this country.”


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