Inflation outstrips rental growth for more than a decade, finds new study

Peter Koulizos, Program Director - Master of Property at University of Adelaide

Research has found that rents have grown at only half the rate of inflation for over a decade – even after allowing for the past year’s rent increases and the current inflation spikes. Ongoing anti-investor sentiment is set to deepen the rental crisis, too, according to experts.

The Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA) have joined forces to highlight the financial reality for property investors.

The study – using the Australian Bureau of Statistics Consumer Price Index from June 2012 to June 2022 – by property academic, Peter Koulizos, found that rents increased by 11% over the decade, but inflation rose by 25.6% over the same period – a shortfall of 15%.

How did rental growth compare with inflation?

On an annual basis, rents increased by about 1% per year, versus average inflation increasing at more than 2% each year over the decade. Koulizos analysed results at a capital city level, which found that rents didn’t keep up with inflation in every capital city apart from Hobart.

Rental growth over 10 years vs. inflation;

Locality Cumulative  rent growth

Jun 12 to 22



Jun 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%

“These results show that rental growth has been below inflation for over 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,” Mr Koulizos said.

“Gov’ts deserted the supply of affordable rental properties, expecting private investors to take over this responsibility, however more investors are deciding that it’s just not worth it.”

What were the thoughts of PIPA on the findings?

The study also found that the rents in Sydney are at the same level as 2016, with Melbourne posting rent at the same level as 2018. PIPA Chair Nicola McDougall said 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.

Commenting on the findings, Nicola McDougall said, “The lending restrictions in 2017 unfairly targeted investors, with many unable to transact for a number of years. From that period of on, the supply of rental properties started to dwindle because investors simply couldn’t qualify for finance – but this research shows that rents have not kept up with inflation.”

“Since the start of the pandemic, investors were initially asked to ‘take one for the team’ and supply free or low-cost housing to their tenants; are continually expected to pay higher costs for everything property-related – from council rates to stamp duty; and will soon be ‘double-taxed’ by the Queensland Gov’t. It’s little wonder that we have heard of investors selling their properties in droves over the past two years because many have simply had enough.”

“And let us not forget that 71% of investors own one property and 90% own just two – this has always been the case – contrary to popular opinion about a plethora of mega-rich people who seemingly own dozens of properties,” Nicola McDougall further commented.

What were the thoughts of PICA on the findings?

PICA Chair Ben Kingsley said that private owners had carried the bulk of rental supply heavy lifting over the past two decades, while gov’ts axed billions from public housing funding.

“These rental providers have also been pressured to carry the full financial burden of rising interest rates, new tenancy reforms, eviction moratoriums, land tax reforms, huge and costly delays in tribunal dispute hearings, and yet over the past 10 years, outside of Hobart, rents haven’t been keeping pace with inflation,” Mr Kingsley said commenting on the findings.

“The rental crisis is the result of gov’t inaction and market interventions. There is no question 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,” he said.

“Well, I’ve got news for you, more and more investors are saying ‘enough is enough’ and are selling up with many, many more expected to follow. The severity of the current rental crisis will look like a walk in the park compared to what will happen next, mark my words.”

“Our industry has been warning State Gov’ts for years that every time they change legislation in their markets, they upset the balance and there are unintended consequences – we are seeing that play out now and there appears to be more silly legislation to come.”

“We just pray they wake up to themselves and start valuing the vital role that ‘mum and dad investors’ play in the provision of housing in this country – or step up to the plate and come up with a viable and achievable plan to greatly increase the supply of rental properties.”