We know that rentals have shot up lately as most of Australia is experiencing a rental crisis.

But looking back over the last decade, inflation has outstripped rental growth, so we’re really only experiencing a catch-up in rentals.

Rental Market

The Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA) have found that rents have grown at only half the rate of inflation for more than a decade – even after allowing for the past year’s rent increases and the current inflation spikes.

Actually, ongoing anti-investor sentiment is set to deepen the rental crisis, too, according to industry experts.

National overview

The research – using the Australian Bureau of Statistics Consumer Price Index from June 2012 to June 2022 – by Peter Koulizos found that rents increased by just 11 per cent nationally over the decade, but inflation rose by 25.6 per cent over the same period – a shortfall of nearly 15 per cent.

On an annual basis, rents increased by about one per cent per year, versus average inflation increasing by more than two per cent each year over the decade.

Rental Growth Over 10 Years Vs Inflation

Capital city levels

Mr Koulizos also analysed results at a capital city level, which found that rents didn’t keep up with inflation in every capital city apart from Hobart over the period.

Mr. Koulizos commented:

“These results clearly show that rental growth has been below inflation for more than a decade, even with the recent spurt of rental price pressure.

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.

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.”

The research also found that the rents in Sydney are at the same level as in 2016, with Melbourne posting rent at the same level as in 2018.

“The volume of investors in the market was below historical averages for half of the research period as well, predominantly due to lending restrictions and yet rents remained well below inflation”, said PIPA Chair Nicola McDougall.

Ms McDougall explained further:

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