Landlord with 118 properties hits back at calls to lower rents after RBA interest rate cut: ‘Ridiculous’
An Australian with 118 investment properties has hit back at calls for landlords to take the Reserve Bank of Australia (RBA’s) interest rate cut into consideration when setting rents. Tenants have faced skyrocketing rental prices over the last few years, with some landlords blaming rising mortgage costs for the increase.
Treasurer Jim Chalmers said he wanted landlords to take the rate cut “into consideration” when setting prices. He noted interest rate cuts had a “broader impact than just people with a mortgage” and would impact the economy and change housing costs.
Sam Gordon, founder of Australian Property Scout, told Yahoo Finance he thought it was “ridiculous” to create a correlation between rent prices and interest rates.
He said the interest rate cut would not impact how he set prices for his tenants.
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“Rents aren’t set by what happens with rates, at all,” Gordon said.
“Interest rates don’t set what rents are in an area, it’s vacancy rates. So how many properties are actually available for rent at any one time.”
It's estimated that one in four landlords don’t have a mortgage and won’t be impacted by this week’s interest rate cut.
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Gordon said the rental crisis had largely been driven by an increase in immigration after the pandemic to stimulate the economy, along with a massive building shortage, which “drove rental shortages into the ground”.
This happened at the same time as the RBA started hiking interest rates.
“Ultimately, pricing is set by the market. It’s got absolutely nothing to do with interest rates. It’s always set by the market and what the demand for or against it is," Gordon said.
An RBA investigation in October found there was limited evidence that investors passed on higher interest rate costs to their rents.
On average, it found that for every dollar increase in an investor’s mortgage interest costs, investors increased their rents by one cent.
Investor's mortgage repayments have increased by $1,483 a month nationally since April 2022, the month before the RBA started hiking rates.
The rate cut will lower interest costs by about $121 a month on a $750,000 loan, according to CoreLogic.
Interest rate cut doesn’t mean lower rents
Jo Vadillo, a buyer's agent and landlord with seven investment properties, told Yahoo Finance she thought it would be some time before renters saw any "knock-on" impact from interest rate cuts.