What it's like owning an investment property in Australia's 2024 economy

The cost-of-living crisis is being felt in many households, and while landlords have been highly maligned for rising rent prices, they’ve also had to bear the brunt of interest rate hikes and rising mortgage costs.

Jeremy Britton has been a landlord in Queensland for the past two decades and while he says he knows he’s been in a fortunate position as a landlord, the cost of maintaining a property has risen in just a few years.

“Everything’s gone up,”  he says. “Some landlords have had their insurance costs double – particularly after the Queensland floods — plus rises in council rates, interest rates, the cost of tradespeople have doubled, and more.

“The rents are rising but the [cost of living] is hitting landlords too.”

The latest Domain Rent Report shows rents across the combined capitals have hit record highs for houses and units at $650 and $630, respectively.  This is an annual rise of 11.1 and 8.6 per cent.

Domain chief of research and economics Dr Nicola Powell  agrees that landlords are also feeling the pinch of the rising cost of living.

“Ultimately, many landlords will still be going backwards,” she says. “When you compare the average rate for an investor loan to the gross rental yields, many will find their costs are still exceeding their income.”

In Sydney, gross rental yields have declined by 0.8 per cent year-on-year to 3.04 per cent. In Brisbane, they are down 6.3 per cent to 3.95 per cent, but in Melbourne they are up 9.7 per cent to 3.65 per cent.

$750 per week

6 Andaman Street, Kings Park NSW 2148

4

1

1

View property

A rental yield is the level of rental return you can expect from an investment property. Traditionally, anything above 5 per cent is considered a decent rental yield.

“It’s been challenging for tenants, but it’s also been equally challenging for landlords to bear the burden of holding debt because costs have changed so significantly,” Powell says.

Property Investment Professionals of Australia (PIPA) chairperson Nicola McDougall says high interest rates are playing a big role in the current imbalance between supply and demand.

$990 per week

76 Palmerston Street, Perth WA 6000

2

1

2

View property

According to data from the Australian Bureau of Statistics’ 2021 census, there are about 2.478 million rental properties across the country. 

The PIPA Annual Investor Sentiment Survey showed that 12.1 per cent of respondents had sold at least one investment property in 2023.

If each of that 12.1 per cent had sold just one property, that would equate to just under 300,000 properties taken off the rental market.

“The sharp increase in mortgage repayments is a significant financial burden for investors,” McDougall says. “While rents have been rising, they are nowhere near that amount that mortgage repayments have increased in that same period, so people are selling off.

“It’s the unfortunate perfect storm: rates have increased, so investors are either increasing rents or exiting the market altogether, so there’s a significant imbalance of rental properties available but a lot of demand.”

$620 per week

227 Hume Street, South Toowoomba QLD 4350

3

1

2

View property

Britton says he has had to increase his tenants’ rent twice in the past few years – once in 2019 and once more recently – to keep the investment property financially viable.

“ I had to increase the rent in 2019 because it hadn’t been increased in four years and we just had to keep up with inflation,” he says. “But during that period, the tenants were young girls who were working in hospitality and studying at university and, of course, in 2020, the pandemic hit.

“They were great tenants – and you want to keep the good tenants – and couldn’t work because of the pandemic so we didn’t charge them rent for some months because no one knew what was going to happen and we didn’t want them to move out either. My partner and I were able to work so we were able to absorb that.”

$1,400

11 Bell Terrace, Graceville QLD 4075

5

2

1

View property

McDougall, who also has investments of her own, says her mortgage repayment on one investment property has increased by $1600 a month, making holding it difficult in the current economy.

“Since the global financial crisis in 2008, there [was] a low interest-rate environment which made purchasing and holding investment properties easier, financially,” she says. “However, now, when we’re in a period of much higher interest rates, the same can’t be said.”

$530 weekly

Mount Low QLD 4818

4

2

2

View property

Britton says he is sympathetic to tenants but ultimately, he has to be able to afford to maintain a property to rent it out.

“When I was first renting, I just thought it was greedy landlords putting the rent up but now I understand … having something like an investment property is costly, but it’s costly for everyone.”