Treasury said its budget changes to investor tax treatment would lift rents by about $2 a week. The latest quarterly rent data, covering the three months to September, suggests that number was well short of what renters are now seeing.
The gap is not small. In roughly 60 per cent of Greater Sydney suburbs, apartment rents rose by more than $2. For houses it was 55 per cent, and many houses jumped by well over $20. Some areas recorded rises of $200 a week. Sydney’s median advertised rent now sits at $800.
This piece tests the $2 assumption against what the data shows, and asks which behavioural responses the modelling probably underweighted.
Testing $2 a week against the observed numbers
Start with the obvious caveat. The figures come from advertised rents, not existing leases. Advertised rents skew higher because they capture the price of a new tenancy in a tight market, while many sitting tenants are on older, lower rates. One chief economist has flagged exactly this.
But that caveat only goes so far. Advertised rents are what a household faces when it needs to move, and they feed into the lease renewals that follow. A $2 forecast and a $200 outlier are not close enough for measurement quirks to explain the difference.
The spread is also national, not a Sydney story alone:
- Queensland: 801 suburbs recorded increases of up to $170 a week, and 92 per cent of markets saw annual rises. Greater Brisbane’s median reached $680 (up $40) and the regional median reached $625 (up $35).
- Victoria: 116 suburbs rose by at least $50 over the year, some affluent areas by more than $200. In Melbourne, 207 of 386 house-rental suburbs rose at least 4.5 per cent, against inflation of 4 per cent.
- South Australia: Hawthorn house rents climbed 30.8 per cent, from $650 to $850.
Timing matters here too. The rise coincides with the May announcement, but coinciding is not the same as causing. Rents were already under pressure from thin supply. The honest reading is that policy was added to a tight market, and the modelling did not capture how tight.
What a static model tends to miss
A $2 estimate looks like the output of a model that treats landlords as passive. The tax change lowers after-tax returns slightly, a small slice gets passed on, and rents edge up. That is a reasonable first-order calculation. It is a weaker guide when the market is already short of stock.
There are at least three responses worth testing:
- Investor exits. If some landlords sell rather than hold, rental stock shrinks. The same demand chasing fewer properties pushes rents up by more than a simple cost pass-through would.
- Reduced new supply. Investors are a meaningful source of demand for new builds. Weaker appetite can slow projects that would have added rental stock two to four years out. The rent effect from that is delayed but real. Our look at building costs and new supply shows how fragile that pipeline already is.
- Expectation effects. Landlords who expect higher costs, and who see neighbours asking more, tend to reset their asking rents together. That can overshoot a mechanical estimate.
A portal analyst quoted in the data release warned rents are unlikely to ease without a big jump in new supply, and that investors may retreat. That is a view about behaviour, and it is the part a $2 figure leaves out.
None of this proves the modelling was careless. It does show how sensitive a small headline number is to assumptions about landlord behaviour, which are the hardest inputs to pin down.
Key numbers
- Treasury assumption: about $2 a week
- Sydney suburbs above that: roughly 60% (apartments), 55% (houses)
- Sydney median advertised rent: $800 a week
- Households that cannot absorb a $20 weekly rise: four in 10, per an advocacy group
The split in commentary
Commentary on this has split along predictable lines. One camp reads the data as proof the policy backfired. The other points out that advertised rents overstate what most existing tenants pay and that supply shortages predate the budget.
Both have a point, and neither settles it. The weakness in the first view is attributing everything to one policy in a market with several pressures. The weakness in the second is that dismissing the data on a technicality does not explain why the forecast and the outcome sit so far apart.
Why the household cost is the real test
The distribution matters more than the average. An advocacy group found four in 10 households cannot absorb a $20 weekly rise. Against that, many houses rose by well over $20, and a $200 jump is a different category of problem altogether.
For renters, that translates into harder choices: moving further out, sharing, or cutting other spending. For the wider market, it feeds into the demand picture. Our rents, vacancy and tenants guide covers how those pressures show up in vacancy and negotiating power.
It also has a policy side. If landlords leave and supply tightens, state governments face pressure to respond with rental rules. That can pull in the opposite direction, as our piece on landlord licensing in Victoria explores.
What to watch from here
The next few quarters will separate the two readings. Watch for three things:
- Whether advertised rent growth cools or keeps accelerating as the post-budget period moves on.
- Whether investor sales show up in listings and rental stock, rather than just anecdotes.
- Whether new construction approvals for rental-oriented stock hold up or fall.
If rents settle back while supply improves, the $2 figure will look like an early misjudgement that corrected. If rents stay high and stock thins, the gap points to a structural underestimate of landlord behaviour.
The practical take for renters and landlords alike: treat the $2 figure as a floor on the debate, not a forecast. Check what comparable properties are actually asking in your suburb before you sign, renew or set a price.
General info, not financial advice.
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