Property Rents Soar As RBA Sits Tight: Is This Policy Failure | Property Insiders

Rates are on hold. Inflation is picking up again. Rents are still squeezing tenants.

If you are feeling that something does not quite add up, you are not alone.

In this week’s Property Insider chat, I speak with housing economist Dr Andrew Wilson about two things that matter enormously to every property investor and home owner in Australia right now

First, the Reserve Bank has left interest rates on hold again at 3.6 percent, after cutting in February, May and August.

On the one hand, inflation has fallen a long way from its 2022 peak.

On the other hand, the latest numbers show it has picked up again, and the RBA is clearly uncomfortable with that.

In its latest statement the Bank basically admitted that underlying inflation was higher than it expected in the September quarter, and it now thinks underlying inflation will actually move above 3 percent again before slowly drifting back towards the middle of the target band by 2027.

So I ask Andrew what that really means.

Is this genuine concern about a second wave of inflation, or is the RBA simply trying to rebuild some inflation-fighting credibility after getting things wrong earlier in the cycle?

Put another way, is the risk now that they keep rates too high for too long?

Second, we will look at My Housing Market’s latest national rental report for October 2025.

Despite all the talk about cost of living pressures and weakening household budgets, the rental market is still telling a story of very strong underlying demand and very limited supply.

Vacancy rates for both houses and units in most capital cities remain well below 2 percent.

In October, house vacancy rates fell in every capital city except Hobart, and unit vacancies are also edging lower in most markets.

Sydney house rents are still at a record 800 dollars a week, Perth houses are at 700 dollars a week, and even Hobart, the most affordable capital, has recorded annual house rent growth of more than 8 percent.

On the unit side, Adelaide and Canberra unit rents are up close to double digits over the year.

So despite a few month to month wobbles, Andrew is warning that tight rental markets mean higher rents remain a continuing prospect. That has big implications for tenants, for investors, and for policymakers who keep promising housing solutions but are not really addressing the supply side.

Let us bring Andrew in now to help us make sense of what the RBA is doing, what is really happening in the rental markets, and what it all means for our listeners who either own property or would like to.

RBA rates steady over November

Why did the RBA keep interest rates on hold at its most recent meeting?  What is the RBA really worried about?

Watch this week's Property Insider Chat to hear what Dr. Andrew Wilson thinks about this.

On the surface, the Reserve Bank’s November decision looked pretty dull:

• Cash rate held at 3.6 percent

• No change to the broad outlook

• The usual language about risks being “balanced”

But if you read between the lines, there is a lot going on.

Earlier this year the RBA cut in February, May and August. Many borrowers hoped those moves signalled the beginning of a steady easing cycle.

Instead, the Board has now pivoted back to a “wait and see” stance.

Of course, this is because although inflation is well down from its 2022 peak, the latest data show it has picked up again:

Headline inflation jumped in the most recent quarter, and underlying inflation was materially higher than the RBA expected

Some of this is technical, with the end of electricity rebates in some states pushing up prices, but the Bank is clearly worried that domestic inflation pressures are still too strong

In its latest material, the RBA basically concedes that underlying inflation will likely push above 3 percent again in the near term and it will only drift back towards the middle of the 2 to 3 percent band over the next couple of years.

In other words, they do not yet trust the disinflation story, and they are afraid of declaring victory too early.

So they are choosing to sit tight and let higher rates do more of the work.

Risk of “higher for longer”

There is a fine line between being prudent and making a policy mistake.

On one hand, the RBA is confronting:

• Stubborn domestic inflation

• A very tight labour market by historical standards

• Strong migration and population growth

• Ongoing supply side bottlenecks in housing and energy

On the other hand, households are clearly hurting:

• Mortgage repayments are still way above where they were a couple of years ago

• Wage growth is not keeping up with the cumulative cost of living increases

• Many borrowers are “coping” only by cutting back spending to the bone

The risk now is that the RBA keeps rates too high for too long.

• Also read:Property Rents Soar As RBA Sits Tight: Is This Policy Failure | Property Insiders
• Also read:Latest Property Price Forecasts Revealed. Australian Property Market Outlook 2026: Where To For Prices With Rate Cuts Delayed.
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• Also read:Latest Property Asking Prices State by State | National Listings Lift Sharply in October as Spring Selling Heats Up
• Also read:Property Prices Accelerated in October | Latest stats from Dr. Andrew Wilson

If that happens, the pain will not be evenly spread.

It tends to fall on:

• Recent first home buyers who borrowed at or near their maximum capacity

• Investors who bought late in the cycle with high leverage

• Households in the outer suburbs and new estates where large mortgages are the norm

At the same time, savers and those with little or no debt are doing reasonably well.

This is why understanding who is actually carrying the interest rate burden is so important for property investors.

If you are well capitalised, you may be able to take advantage of the window of opportunity that is currently being presented.

The rental market is telling a different story

While the RBA is focused on inflation averages across the entire economy, the rental market offers a very real time insight into where housing is under the most pressure.

Watch this week's Property Insider Chat as Dr Wilson discusses my housing Market’s October 2025 Rent Report, which reported that capital city rental markets generally tightened further over the month:

• Vacancy rates fell in most capitals
• Rents for houses were mostly steady month to month, but are substantially higher than a year ago
• Rents for units show a similar pattern in many markets

And the vacancy rates for units are generally around or below 2 percent, with some capitals materially tighter.

This is not a picture of a rental market cooling meaningfully. It is a market that has paused in a few places but is still under chronic supply pressure almost everywhere

Why rents are still rising

So why are rents still rising even as the broader economy slows and households feel cost of living pressure?

There are a few key drivers:

1. Chronic undersupply of rental stock
   • Years of underbuilding
   • High construction costs and builder insolvencies
   • Planning delays and uncertainty
   • Limited social and community housing
2. Strong population and migration growth
   • More people needing a roof over their head
   • Many new arrivals rent first, creating extra demand in the lower to mid price bands
3. Investors leaving or not entering the market
   • Higher interest rates eat into cash flow
   • Tightening lending standards reduce borrowing capacity
   • Policy uncertainty around land tax, rent caps and tenancy reforms in some states makes long term planning harder
4. Households regrouping after the rate shock
   • Some renters are delaying home ownership
   • Others are moving back into share houses, but that takes time to show up in the data

Put simply, we have too many people chasing too few rental properties. Rates might be high, but they have not magically created more homes.

What all this means for investors

If you step back and look at these two stories together, a pattern emerges.

• The RBA is trying to engineer a gentle slowdown in the economy without letting inflation flare up again
• The rental market is telling us that housing demand is still strong relative to supply, especially in key capitals

For investors with a long term, finance ready mindset, that combination can actually be quite powerful:

• Higher rates are keeping some speculative buyers on the sidelines
• Tight rental markets are supporting yields and providing a buffer against rate costs
• Over time, the lack of new dwellings being completed is likely to exacerbate the shortage in well located suburbs

Of course, this does not mean you should rush out and buy anything. It means you should:

1. Get your house in order financially
   • Review your buffers
   • Lock in sensible loan structures
   • Make sure you can ride out a longer period of higher rates if needed
2. Be very selective with what and where you buy
   • Focus on investment grade locations with strong income demographics, not just headline yield
   • Favour properties that will be in ongoing shortage because of land constraints, lifestyle appeal and local job growth
3. Think like a business owner, not a speculator
   • Your property portfolio is your asset growth business
   • You need a clear plan for how each asset contributes to your long term wealth, not just a hope that “prices go up”

At Metropole we are seeing a clear divide:

• Some investors are paralysed by the headlines and do nothing
• Others are quietly taking advantage of the confusion and negativity to secure quality assets that will look cheap in hindsight

Tenants, landlords and the blame game

Whenever rents rise, the public debate almost always turns into a simple story:
“greedy landlords vs struggling tenants”.

The data tell a more nuanced story.

• Landlords face higher mortgage repayments, higher insurance, higher maintenance costs and higher land tax in some states
• Tenants face bigger rent cheques, increased competition and greater insecurity

The real villain is the persistent failure to build enough appropriate housing, and the tendency of governments to chase short term political wins instead of providing a stable, long term framework that encourages investment.

Policies that discourage private investment in housing might feel good politically, but they almost always make the rental crisis worse over time.

Some final thoughts

We are in a very unusual phase of the cycle.

• The RBA has cut rates three times already, but not enough for borrowers to feel real relief
• Inflation is down from its peak, but still too high for the Bank’s comfort
• Rental markets are tight, and in many capitals rents are still grinding higher on very low vacancy rates

This is exactly the sort of environment where good information and calm thinking matter.

If you are serious about building wealth through property, the cost of doing nothing could be the most expensive investment decision you ever make.

Think about it… Every time you delay making a financial decision, the world doesn’t pause for you.

• Property values continue to rise, and this is only the beginning of a new Super Cycle!
• Rents keep climbing.
• Interest rates and government incentives shift – again adding fuel to the flames of our housing market.

At Metropole, we’ve seen this play out countless times over multiple property cycles.

Our clients who build significant, lasting wealth aren’t the ones who try to time the market – they’re the ones who take action with a clear strategy and trusted guidance.

That’s exactly what our Wealth Discovery Chat is designed to give you:

• A safe space to clarify your goals and ambitions.
• Expert insights into the opportunities and risks right now in today’s market.
• A personalised pathway to move forward confidently, without second-guessing every step.

Let’s chat about your property goals – book a time now

This is not about selling you a property. It’s about creating a roadmap for your wealth, one that takes advantage of today’s conditions while preparing for the future.

So, let me ask you directly: If not now, then when?

Because the reality is this – the market won’t wait. And neither should you.

👉 Book Your Complimentary Wealth Discovery Chat Now