Rate Rise = Rent Rise?

No, rents are very much driven by supply and demand.

You generally can't arbitrarily increase them unless the rest of the market has already moved due to supply restrictions (ie people can't rent similar or better properties nearby for the same or less money).

 

It depends on how much you're already charging and where the rest of the market is - and also on where your property is located (different states approach these things differently).

Generally, if you are increasing rents to meet the market, you shouldn't have a problem, but otherwise, increases of more than 10% above what the tenant is currently paying is likely to be looked at pretty carefully by the tribunal if they complain.

I had a property where (due to very bad PM practices and poor oversight by myself), I had a two properties which were rented massively below market.

One of the properties I had the tenant move out when we indicated we would be putting rents up at the end of their lease and so I was able to immediately advertise it at market rent.

The other property we had long term excellent tenants (this was our ex-PPOR and they were our first tenants after we moved out and stayed until we sold the property 15 years later), so we had to increase rents gradually over a period of years to try and meet the market since we didn't want to lose our tenants. They did realise they were getting bargain rents, so didn't complain about the increases ... I think we were generally putting them up by around 10% per year over a 3-4 year period.

We rent a house in Sydney (houses in this street are selling for over $2m now) ... our rent went up last year by $100pw and will go up again this year by a further $100pw, but will still probably be more than $100pw below market rent (this year is our 10th year of living here). If you work out yields based on expected sale price versus current rental return they are very very low

 

Rent rises are not linked to what the interest rates are doing (generally)... but I think you know that...

We increase the rent when rents generally in the local area are heading upwards. If we find ourselves with lower than market rent, we creep it up rather than hit the sitting tenant with a big jump and risk them looking at what else they can get.

For many years we kept the rent low because it seemed tenants would move on after twelve or 24 months and we would jack it up to "market" at that time. These days we tend to raise it a little each new lease as we have long term tenants.

We have at times kept rent less than market because we know that if a tenant leaves, we have a big renovation to do to get good rent. That is a considered decision, and we try to control the timing of such renovations to fit in with a time that suits us financially, and when we have free time to get stuck into the job (doing things ourselves, or even just project managing, purchasing, making decisions etc).

To try to raise the rent right now, for example, would be silly. Rents around where our houses are situated are very flat and for probably only the second (maybe third?) time in over 35 years of being a landlord, I've lowered the rent to get a tenant in.

 

At a micro-level (ie individual properties), we all follow the market, we don't set it.

However, at a macro level, there are other factors at play when it comes to external forces such as interest rate rises.

1. if their expenses go up, landlords WILL try and push their rents as high as they can get away with based on current market conditions. This can lead to "market" rates increasing overall, provided that there isn't a supply excess where landlords are just happy to get a tenant at whatever rent they can (thus driving down rents).

2. in some cases, landlords find their expenses too much for the rent they are able to get, and will sell their property - which sometimes removes it from the rental pool, thus reducing supply.

So, while you generally can't force the market higher on your own (unless you are in a very small and very tightly held market) - you certainly play a part in influencing the market.

 

It doesn't work like this at a macro level. This is called an increase in the cost of living - and people just have to wear it and hope that their income increases to cover the increased rent.

If it doesn't, they will simply look for somewhere cheaper to rent - but not everyone will be in this situation, so it won't ever be "the majority of tenants".