{"id":584988,"date":"2026-08-30T14:28:15","date_gmt":"2026-08-30T14:28:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/584988\/"},"modified":"2026-08-30T14:28:15","modified_gmt":"2026-08-30T14:28:15","slug":"aussie-landlords-could-see-their-power-evaporate-despite-forecasts-of-big-rent-increases","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/584988\/","title":{"rendered":"Aussie landlords could see their power evaporate despite forecasts of big rent increases"},"content":{"rendered":"\n

Changes to the capital gains tax, and in particular the phasing out of negative gearing for property investors<\/a>, came with some alarming predictions for renters<\/a>. While the changes are grandfathered, future landlords will need to raise asking rents to counteract the increased out of pocket costs<\/a>, many asserted. <\/p>\n

That may be true, with NAB economists recently suggesting without price falls, rents would need to be as much as 30 per cent higher to justify the investment<\/a>. But before getting into the current environment, it’s worth exploring the level of growth in asking rents prior to the federal budget. <\/p>\n

According to figures from SQM Research, taken from the day before the federal budget, rents had grown by 7.3 per cent at a national level over the previous 12 months and by 6.9 per cent at the capital city average. <\/p>\n

RELATED <\/p>\n

\"Heading<\/a> Heading into the budget, rents were up considerably. <\/p>\n

This was more than double the 3.2 per cent rate of wages growth seen in the ABS Wage Price Index in the year to the end of the June quarter. <\/p>\n

Since budget night, the rolling annual rate of growth in asking rents has slowed by 0.1 percentage points at a national level and by 0.4 percentage points at the capital city average. <\/p>\n

\"Change<\/a> The rolling annual rate of growth in asking rents has slowed by 0.1 percentage points at a national level. \u00b7 SQM Research <\/p>\n

Which raises an interesting question, why haven’t rents accelerated further given that claims to that effect are making waves on social media every day and even making it into the mainstream. <\/p>\n

In short, while rents influence the decision of investors to build new homes, beyond that the level of rents actually has little to do with the cost of providing rental accommodation. <\/p>\n

Costs can rise dramatically, but if landlords have no market leverage, which is dictated by supply and demand economics, they can’t raise rents significantly. <\/p>\n

The Canadian proof <\/p>\n

A good example of this is the Canadian rental market since mid-2021. <\/p>\n

Between August 2021 and August 2023, the prime variable mortgage rate for Canadian mortgage holders rose from 2.45 per cent to 7.2 per cent, where it remained until June 2024. <\/p>\n

Yet despite the cost of servicing an interest only mortgage rising by almost threefold, today rents are only a little under 18 per cent higher than where they were in 2021. <\/p>\n

\"Rental<\/a> Rental costs have fallen in Canada. <\/p>\n

Based on the average Canadian house price in 2021 of $688,100 and an interest only mortgage, the cost of servicing a loan on a prime rate rose from $13,500 in 2021 to $39,600 in 2023, an increase of $26,100 per year. <\/p>\n

Meanwhile, the amount of rent payable annually on the average Canadian rental rose by $4,800 per year. <\/p>\n

Story continues <\/p>\n

Despite a series of rate cuts from the Bank of Canada, today the cost of servicing that same interest only mortgage is $15,600 more than it was in 2021. <\/p>\n

At the average, a Canadian property purchased with a 5% deposit on a prime variable rate mortgage in 2021 is losing $4,600 per year based on the cost of an interest only mortgage alone. <\/p>\n

MORE: Aussie landlords given backdoor bailout despite CGT and negative gearing change<\/a> <\/p>\n

\"Houses<\/a> Houses in a residential neighbourhood in Vancouver, British Columbia. \u00b7 Bloomberg <\/p>\n

Once other costs such as insurance, home maintenance and property management are factored in, the investment is being run at a deep loss. <\/p>\n

Yet despite a sizeable proportion of Canadian property investors losing money, they have no market leverage to raise rents at the average and asking rents have been falling for 22 consecutive months in year-on-year terms. <\/p>\n

The Kiwi experience <\/p>\n

Across the Tasman, rents relative to investment property costs have followed a relatively similar path to Canada. <\/p>\n

In October 2021, when variable mortgage rates began to rise, the median asking rent nationally in New Zealand was $560 per week. <\/p>\n

Fast forward to the latest data from the Trade Me Rental Index, the median rent nationally has risen $60 per week (10.7 per cent) to $620 per week. <\/p>\n

Meanwhile, the interest rate on a variable rate mortgage rose by 4.09 percentage points \u2013 or 90.4 per cent in relative terms! \u2013 to the highs that persisted until August 2024 when interest rates were cut. <\/p>\n

Today, the prevailing variable rate is 1.8 percentage points higher than the final pre-rate rise reading (39.8 per cent higher in relative terms) and 0.87 percentage points higher than prior to the pandemic (16.0 per cent higher in relative terms). <\/p>\n

Landlord pricing power can evaporate with falling migration <\/p>\n

While property purchase prices are a far more complex proposition factoring in other variables such as interest rates, lending standards and credit availability, among a multitude of others, rents are a significantly simpler expression of the balance of supply and demand. <\/p>\n

The leverage landlords have in the current market hasn’t increased, at least not yet. <\/p>\n

So, despite the changes to their fortunes in terms of the future treatment of their capital gains years down the road, the balance of supply and demand within the market has not changed significantly enough to allow them to raise rents by a greater rate than prior to the budget. <\/p>\n

The leverage that they do hold, which remains sizeable, does not stem from rising costs, but is largely derived from the population growth and its impact on housing demand and new supply that is hopelessly unable to keep up. <\/p>\n

Ultimately, as the examples of Canada and New Zealand have revealed in recent years, this leverage can evaporate and leave rental growth flat or even falling if migration levels were to be significantly cut. <\/p>\n

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