Rate rises are deepening Perth’s rental crisis

Rising interest rates are bad news for Perth’s renters, and not only because landlords pass higher mortgage costs on through rent increases.

The Reserve Bank of Australia (RBA) raised the cash rate to 4.35 per cent this week – the third increase in 2026 – and the same rate environment pricing buyers out of ownership is simultaneously constraining the apartment supply, which renters depend on.

Perth’s rental market is already under severe strain. REIWA data shows the vacancy rate dropped to two per cent in March, tightening from 2.6 per cent last December and this January, and 2.2 per cent in February.

The median rent for a unit sits at about $700 per week, with properties leasing in a median of just 15 days. It is moving in one direction.

On the demand side, higher borrowing costs price more would-be buyers out of ownership, extending the time they spend renting and intensifying competition for available properties.

That dynamic is well understood. Less examined is what happens on the supply side.

Higher rates directly affect the economics of apartment development – finance costs rise, pre-sales become harder to secure and projects that were marginally viable become unviable.

At precisely the moment more people need rental housing, the conditions for building it deteriorate.

With underlying inflation stuck at 3.3 per cent and consumer confidence at a four-decade low, the RBA’s position is genuinely challenging, but for Perth’s rental market, the implication for new supply is unambiguous.

REIWA has identified what it calls a triple threat to rental supply.

Investors provide more than 86 per cent of Western Australia’s private rental stock, and policy uncertainty around negative gearing and capital gains tax is prompting some to exit the market, while the end of the National Affordability Rental Scheme in June will return about 1500 affordable rentals to market rates.

The supply decline is most acute closest to the city, where competition for available properties is already fiercest.

Perth’s rental market will not ease its way through the rate cycle. Each hike brings more renters competing for fewer properties while simultaneously making it harder to build the apartments that would relieve the pressure.

The only durable solution is more supply, and the conditions for delivering it are moving in the wrong direction.