A new report from the Reserve Bank of Australia has debunked the myth that landlords passing on high interest rates to tenants are solely responsible for inflated rental prices. While interest rates and rental rates often increase together, the report suggests that low housing supply, not interest rate hikes, is the main driver behind rising rents.
The RBA economists found little evidence of landlords directly passing on interest costs to tenants. Instead, they discovered that for every dollar increase in mortgage interest costs, landlords only raised rents by one cent on average.
Despite interest rate hikes leading to a rise in median mortgage payments, the report estimates that this increase in costs has only contributed to a $10 per month rent increase.
The blame for high rents was placed on the lack of available housing, with strong demand and limited supply driving prices up. The report highlights the significance of housing demand relative to the housing stock as the primary factor influencing rent prices.
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