Rising interest rates have little impact on rent increases, new research from the Reserve Bank of Australia (RBA) shows.

The RBA found that rents only increase by around 1 cent for every $1 rise in loan repayments, meaning property investors and landlords are absorbing most of the cost.

The analysis, based on 13 years of investor tax returns, revealed that between April 2022 and January 2024, investors’ loan interest payments rose by about $850. This would have led to a rent increase of less than $10 per month, or just over $2 per week.

The RBA notes that rents and interest rates often rise together, but this is “correlation rather than causation.”

Both follow similar economic cycles, and while interest rates have some effect on rent, the link is minimal.

Instead, the RBA attributes rent increases to a higher demand for housing compared to the available stock.

It highlights that recent rent surges reflect factors like high population growth and a stronger preference for larger living spaces, paired with limited housing supply due to construction costs and capacity constraints.