How The RBA Wiped Out 35,000 Rental Properties

Rising interest rates have helped to worsen Australia’s rental crisis, with a new study showing that the 11 interest rate rises imposed by the RBA from May 2022 to May 2023 resulted in 35,000 fewer rental properties coming onto the market due to a big fall in lending to property investors.

The study was undertaken by Property Club, Australia’s largest independent property investment group.

Kevin Young, President of Property Club, said that over this 12-month period, total lending to property investors in Australia fell by a massive $28 billion as a result of surging interest rates.

“This $28 billion collective fall in property investment lending translates into 35,000 fewer rental properties based on a median house price of $800,000.

“Rising interest rates have had a negative impact on property investment lending and resulted in 35,000 fewer rental properties coming onto the market than would not have occurred if interest rates had remained unchanged.

“These figures do not include the thousands of mum and dad property investors who have been forced to sell their rental properties over the past year because the higher mortgage repayments would not have been covered by their rental income.

“The impact for tenants has been disastrous, with many now struggling to find a rental property.

“One simple policy change can quickly end the rental crisis in Australia – by reversing recent counterproductive rules to lending practices for property investors.

“Since 2016, property investors have been hit by higher interest rates compared to owner-occupiers due to new rules imposed by APRA.

“At the same time, APRA effectively made it effectively impossible to get access to lower cost interest only loans meaning that property investors on principal and interest loans have had to sell as they cannot service these higher repayments.

“Unless there are immediate changes to restore previous lending practices for investors, then Australia will entrench the rental crisis that is gripping the nation.

“Rather than being seen as a short-term phenomenon in Australia, this rental crisis will last for years unless investment lending for investors becomes easier so the supply of rental properties can be boosted over the long term.

“The full access to interest-only loans – as is the case in other developed countries - should be restored immediately to investors, and this change would not cost the government one extra dollar in public expenditure.

“Property Club also believes that the supply of cheaper lower, priced rental properties can be immediately increased if the Federal Government restores tax depreciation benefits to second-hand properties, which were moved in 2017.

“This meant that property investors were incentivised to buy new properties that had higher rents rather than older properties offering tenants lower rents’ he said.