Rents Are Rising Again: What Property Investors Should Check
If you're a landlord or thinking about becoming one, you've probably noticed rents just keep climbing. New data confirms it. According to Cotality's latest Rental Review, national rents rose 5.9% over the past year, pushing the median weekly rent to $705. Zoom out five years, and rents are up a massive 40.6%, adding roughly $204 a week to the average household's rent bill.
It's not just an East Coast story either. Perth rents have hit $784 a week and Brisbane has climbed to $734, both closing the gap on Sydney, which still tops the country at $841 a week.
Why Rents Keep Climbing
The short answer is supply. The national vacancy rate is sitting at just 1.6%, and rental listings remain 16.7% below the five-year average. Available rental supply remains tight, which continues to place upward pressure on rents across the capital cities.
There's a silver lining for investors here. Rental yields have crept up too, with the national gross rental yield now at 3.7%, a bit higher than where it sat at the end of last year. That said, yields are still running below the cost of borrowing in a lot of cases, so it's not as simple as "rents are up, so investing is easy."
What This Means If You're Financing An Investment Property
Higher rental income may support an investment loan application, but it does not automatically increase borrowing power. Lenders also assess income, expenses, existing debts, repayments and lending criteria. As a broker, this is where the headline numbers matter less than what they mean for your actual finances. A few things worth thinking about:
- Don't just chase the rental yield. Compare it properly against your current or expected interest rate and holding costs, because a strong yield on paper doesn't always mean strong cash flow.
- Gross rent is not the same as net cash flow. Allow for vacancy, maintenance, property management, insurance, rates, strata costs and loan repayments.
- Build in a buffer. Vacancy periods, rate changes and maintenance costs can all eat into rental income fast, so it pays to plan for them upfront rather than after they happen.
- Review your borrowing capacity early, particularly in Perth, Brisbane and Sydney, where weekly rents are high, but purchase prices, yields and holding costs vary.
Rising rents can look like good news for investors, but overcommitting based on today's numbers is a common trap. A sustainable, long-term loan strategy will serve you far better than chasing the latest headline figure.
To review your borrowing capacity, expected repayments or investment loan options, contact KM Financial Services.
Feel free to call us on 0402 879 531 or book a free consultation today. We’re here to help you plan properly and secure the right finance structure for your investment goals.
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