{"version":1,"type":"rich","provider_name":"Libsyn","provider_url":"https:\/\/www.libsyn.com","height":90,"width":600,"title":"Rising Rents, Real Reason","description":"Politicians and journalists love to scapegoat and demonise, particularly with issues impacting housing markets \u2013 with property investors always a popular target. Australia\u2019s love of scapegoating is one of the reasons the nation seldom resolves any of the key issues it faces. Politicians hold press conferences, they stage inquiries, they bring on royal commissions, they make announcements \u2013 but the recurring theme is looking for someone to blame and to vilify \u2013 preferably someone other than themselves. In real estate, investors and related issues like negative gearing are blamed for all the problems afflicting the housing industry \u2013 including poor affordability and rising rents. But, according to analysis by the Reserve Bank, property investors have copped the brunt of rising interest rates and haven\u2019t passed on their impact to tenants in the form of higher rents \u2013 or, not much. New Reserve Bank research debunks the idea that so-called greedy landlords simply pass on higher mortgage costs to their tenants via rent increases. According to the RBA analysis, after analysing years of investor tax returns, for every $1 increase in home loan interest repayments, property investors have raised rents by just 1\u00a2. The RBA economists who wrote the report said: \u201cTo put this effect in context, the median monthly interest payment for leveraged investors increased by around $850 between April 2022 and January 2024. \u201cOur estimate suggests that this $850 increase in interest costs would have raised rents by less than $10 per month, or just over $2 per week.\u201d The research, released in the RBA\u2019s quarterly bulletin, is an attempt by the central bank to refute the commonly held perception that landlords pass simply higher interest rates on to renters.  While there is a public perception that rents and interest rates tend to move in tandem, the RBA says this is more a case of correlation rather than causation. The RBA says: \u201cPinning down the relationship between interest rates and rents is tricky because both will tend to move together with the economic cycle. \u201cFor example, a strong economy, with a pick-up in income growth, will see increased demand for rental properties. This will put upward pressure on rents. At the same time, interest rates may be raised to reduce inflationary pressures.\u201d So they\u2019re saying that rising rents and rising interest rates tend to occur at the same time, rather than one causing the other. The sample period for this research includes two other interest rate tightening cycles, including immediately before and after the global financial crisis. RBA governor Michele Bullock said in August the fundamental reason rents were increasing so quickly was because there was not enough housing supply to meet demand. Bullock told a parliamentary hearing: \u201cLandlords can only pass on interest rate rises into rents if there is demand for those properties. If there isn\u2019t, then it\u2019s very difficult for them to pass those costs on.\u201d The researchers said that housing demand had been strong due to high population growth and an increase in the number of households with spare rooms.  Meanwhile, supply had been hampered by rising construction costs, which the RBA says have increased 40 per cent over the past four years \u2013 although other estimates say they have risen more than 50% in the past three years. You could argue that the RBA has a vested interest in the argument they are presenting, because many believe that higher interest rates have driven increases in rents over the last few years - and therefore Bullock and the other financial elites on the RBA board are to blame for the rise and rise of residential rentals. What do I think? I don\u2019t think much of the RBA and its arrogant out-of-touch behaviour which sees only economic graphs, charts and numbers \u2013 and displays no feeling for the impact of their ivory tower decisions on ordinary Australians, without achieving the end goal of actually taming inflation. But, I think they\u2019re correct in this instance. Higher interest rates have not caused higher rents. It doesn\u2019t matter how high interest rates go, or any of the other rising costs of property ownership \u2013 investors can increase rents ONLY if there\u2019s high demand and low supply. It\u2019s historically low vacancies that have caused rents to rise and rise \u2013 not high interest rates.   ","author_name":"Hotspotting","author_url":"http:\/\/sites.libsyn.com\/101000\/site","html":"