Landlords & Rate Cuts: Why Rental Prices Won’t Drop Anytime Soon
Why Landlords Won’t Pass on Rate Cuts to Tenants
The Reserve Bank of Australia’s first rate cut in over four years has sparked debate about whether landlords should pass on the savings to tenants. However, with ongoing cost pressures—from land tax and insurance hikes to compliance costs—most investors say the cut isn’t nearly enough to justify lowering rents.
The Reality of a 0.25% Rate Cut for Landlords
For landlords like Melbourne-based Stefan Belevski, the $340 monthly savings across his three investment properties does little to offset the significant cost increases of the past three years.
"Any suggestion that mum-and-dad investors should pass that, or every rate cut, to tenants is absolutely ridiculous," he told AFR Weekend.
This sentiment is echoed by Sydney investor Michael Overton, who says he will only reduce rent if market conditions force him to.
"We’ve had to gradually increase the rent in the past three years as interest rates have gone up excessively, mainly to cover costs, not to make profits."
Why Landlords Can’t Afford to Cut Rent
While a 0.25% rate cut might seem significant, the reality is that mortgage repayments have increased by over $1,400 per month in some cities since the RBA began raising rates in 2022. Meanwhile, rental income has risen much more slowly, leaving investors to cover huge shortfalls:
Sydney: $1,429 per month deficit
Brisbane: $1,397 per month deficit
Perth: $1,373 per month deficit
Adelaide: $1,293 per month deficit
Melbourne: $607 per month deficit
(Source: CoreLogic)
Even in cities where rents have climbed, these increases haven't kept pace with skyrocketing mortgage repayments. Many landlords are still in negative cash flow, meaning that despite small interest rate relief, they continue to absorb higher costs rather than make profits.
The Changing Rental Market & Vacancy Rates
Another factor at play is the slowdown in rental price growth. While rents increased by 8.5% last year, that growth has halved to 4.4% in the past 12 months, making it harder for landlords to pass on rising costs.
Meanwhile, vacancy rates are creeping up:
Sydney: 2.4% (up from 2%)
Melbourne: 1.7% (up from 1.3%)
Brisbane, Perth & Adelaide: Slight increases, ranging from 1% to 2.2%
This is due to reduced migration, more people returning to shared housing, and new investor properties entering the market. If vacancy rates continue to climb, some landlords may eventually need to lower rents—but for now, most are holding firm.
Why Renown Lending is the Perfect Partner for Property Investors
For landlords navigating high mortgage costs, Renown Lending provides tailored financing solutions that can ease financial pressure without relying on market-driven rent increases.
✔ Short-Term Property Finance: Whether you need a bridge loan, a refinance option, or additional funds for property investments, we provide flexible solutions that traditional banks can’t.
✔ Competitive Interest Rates: Access property-backed loans with favourable repayment terms, allowing you to manage your portfolio efficiently.
✔ Fast Approval & Minimal Red Tape: Unlike major banks, we prioritise quick decision-making, ensuring landlords have access to funds when they need them most.
✔ Alternative Investment Opportunities: If rental yields aren’t meeting expectations, consider private lending as an alternative income stream, earning fixed returns outside of traditional real estate.
Final Thoughts
While the RBA’s rate cut provides some relief, landlords remain under significant financial pressure due to years of rising interest rates, land taxes, and other ownership costs. Until market conditions shift, rent reductions are unlikely—despite political calls for landlords to ease tenant burdens.
For property investors looking for better financial stability, Renown Lending offers tailored private credit solutions, helping landlords stay ahead in a volatile market.
Need flexible property finance solutions? Contact Renown Lending today to explore financing options tailored to your investment strategy.
