Inflation has outpaced rent growth for more than a decade

  • Rents have only risen at half the rate of inflation over the past decade
  • Rents have not kept up with inflation in any capital except Hobart
  • Investor volume has also halved, which should translate to fewer rental properties

New industry research has shown rents have only risen at half the rate of inflation over the past decade, despite significant increases in inflation and rents over the year elapsed.

Lingering anti-investor sentiment is also set to worsen the rental crisis, according to industry experts from the Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA).

Property academic Peter Koulizos used data from the Australian Bureau of Statistics’ Consumer Price Index from June 2012 to June 2022, which shows rents have risen 11% over the decade. However, inflation increased by 25.6% over the same period, a shortfall of 15%.

On an annual basis, rents increased by 1%, while inflation increased by more than 2% per year during the decade.

When assessed at capital level, rents have not kept pace with inflation in every city except Hobart.

Rent growth over 10 years vs. inflation

locality Cumulative
rent growth
June 12 to 22
Cumulative
CPI
June 12 to 22
Australia +11.0% +25.6%
sydney +12.5% +25.6%
melbourne +12.5% +25.6%
Brisbane +12.1% +25.6%
Adelaide +16.7% +25.6%
Perth – 2.7% +25.6%
Hobart +37.9% +25.6%
Darwin -5.9% +25.6%
Canberra +15.6% +25.6%

Source: Peter Koulizos; Australia Bureau of Statistics 6401.0 Consumer Price Index, Australia

“These results clearly show that rent growth has been below inflation for more than a decade, even with the recent surge in pressure on rent prices,” Koulizos said.

“In addition to their cash flows being impacted due to this imbalance between income and inflation, investors have also had to fund a wide variety of additional costs levied by all levels of government over the past decade. .

Peter Koulizos, President of PIPA. Picture provided.

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

The analysis noted that rents in Sydney are at the same level as in 2016, in Melbourne at the same level as in 2018.

Number of investors halved

PIPA President and member The Property Tribune Contributor Nicola McDougall noted that the volume of investors in the market was below historical averages for half of the research period, mainly due to lending restrictions, however, rents remained well below inflation.

“Lending restrictions in 2017 unfairly targeted investors, many of whom were unable to transact for several years,” Ms McDougall said.

“From this period, the supply of rental properties began to decline because investors simply could not qualify for financing – but this research shows that rents have not kept up with inflation.

Nicola McDougall, President of APIP

“Since the onset of the pandemic, investors were first asked to ‘take one for the team’ and provide free or low-cost housing for their tenants; are continually expected to pay higher costs for everything related to property – from council rates to stamp duty; and will soon be “double taxed” by the Queensland government.

nicola mcdougall
Nicola McDougall. Picture provided.

“It’s no wonder we’ve heard of investors selling off their properties en masse over the past couple of years, because many are simply fed up.

“And let’s not forget that 71% of investors own one property and 90% only own two – this has always been the case – contrary to popular opinion about a plethora of mega-rich who apparently own dozens of properties.”

Ben Kingsley, president of the PICA, added that private owners of rental properties had taken over much of the market in recent decades, with governments cutting billions from public housing funding.

“These rental providers have also been pressured to bear the full financial burden of rising interest rates, new lease reforms, eviction moratoriums, property tax reforms, huge delays and costly in litigation hearings, and yet over the past 10 years, outside of Hobart, rents have not kept pace with inflation,” Mr Kingsley said.

“The current rental crisis is the result of government inaction and market intervention. There is no doubt 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.

Ben Kingsley, PICA President

ben kingsley
Ben Kingley. Picture provided.

Mr Kingsley reiterated that many investors are growing increasingly frustrated, which will likely translate into more sales of their investment properties.

“Our industry has been warning state governments for years that every time they change the law in their markets they upset the balance of the market and there are unintended consequences – we are seeing this happening now and there seems to be dumber legislation to come.

“We just pray that they wake up and start to appreciate the vital role that ‘mum and dad investors’ play in providing housing in this country – or step up and come up with a viable and workable plan to dramatically increase the supply of rental properties in this country.

About Vicki Davis

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