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Rental growth not keeping pace with inflation: Analysis

By Staff Reporter
09 August 2022 | 11 minute read
peter koulizos nicola mcdougall ben kingsley reb noqfal

A long-term view reveals that average rental costs — while rising rapidly at the present moment — have lagged behind the rate of inflation over the last decade.

Data analysed by the Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA) has shown that rents have grown at only half the rate of inflation since at least 2012.

Using the Australian Bureau of Statistics consumer price index from June 2012 to June 2022, property analyst Peter Koulizos found that during the 10-year period in which inflation rose 25.6 per cent, rents increased on average by only 11 per cent.

Averaged out, that means that rents experienced a rise of a little over 1 per cent across the country each year during the past 10 years.

At a capital city level, Hobart was the only city in which rental rises kept pace with inflation.

Darwin and Perth’s cumulative net rent growth actually fell back over the course of 10 years, recording dips of 5.9 and 2.7 per cent, respectively.

Mr Koulizos remarked that this data was important to keep in mind, especially with the recent spurt of rental pressure.

And he noted that the rate of inflation meant that investors had come under increasing pressure over that period of time.


“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,” Mr 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 agreed that the current situation of tight vacancy rates had been years in the making.

“The lending restrictions in 2017 unfairly targeted investors, with many unable to transact for a number of years,” Ms McDougall said, noting that the COVID-19 pandemic had only exacerbated pressures on landlords.

“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; are continually expected to pay higher costs for everything property-related — from council rates to stamp duty; and will soon be ‘double-taxed’ by the Queensland government.

“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.”

The two bodies are calling on governments to ensure they’re pulling their weight when it comes to rental supply.

PICA chair Ben Kingsley commented: “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.

“Well, I’ve got news for you, more and more investors are saying ‘enough is enough’ and are selling up with many, many more expected to follow. The severity of the current rental crisis will look like a walk in the park compared to what will happen next, mark my words.”

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