Rate Rises To Push Rents Up $2 Billion

Rising interest rates will result in tenants nationwide collectively paying an extra $2 billion in rent over the next year, according to Australasia’s largest real estate and property group, Ray White.

Ray White’s Director of Property Management, Ben White, said the Reserve Bank of Australia’s monetary strategy to increase official interest rates will flow on to the rental market.

“Every force in the market place will be driving rents higher,” Mr White said.

“The mortgages of rental property owners are becoming more expensive so it’s inevitable that this will result in rents going up.

“Property managers can expect to be conducting a lot more rent reviews this year.”

The RBA has increased the cash rate five times since October last year, lifting the official rate to 4.25 per cent after it was dropped to a half century low of 3.0 per cent in response to the global financial crisis.

Mr White said with most economists predicting the cash rate to be increased to around 5.0 per cent by the end of this year, this would put further pressure on rents.

“This will have a major impact on the economy,” he said.

“There are around two million rental properties in Australia and if rents were increased by around seven per cent or $20 a week that amounts to $2 billion over a year.”

Mr White predicted a significant increase in rent review valuations over the next 12 months with landlords expected to seek increases to cover the cost of the interest rate rises.

“The rental market has been relatively soft for a while so we will see a lot more rent reviews taking place as a result of these interest rate rises,” he said.

“Professional property managers will be under pressure to determine the best market rent rate.

“A property manager on top of their game will not only be working to get a property tenanted, but also help their landlords get the best rent for that property.”

Mr White said there had been a rebalancing of the property market since the federal government’s boosted First Home Owners Grant returned to its traditional level at the end of last year.

“The stimulus package took some rental stock off the market but since the expanded grant scheme was pared back there’s been a return to more traditional levels of investment properties,” he said.

“Population growth in the major cities will ensure there is plenty of demand for property, and also investment property.

“Many hard working families have become landlords for the first time because they see the long term benefits of maintaining an investment property.”