While new modelling suggesting rents could surge by as much as 30 per cent over the next two years has caused shock, its a figure that echoes the rental hikes recorded in some capital cities after the Hawke government’s 1985 negative gearing changes, that were later reversed in 1987.
Recent modelling from NAB and Ray White has outlined a scenario in which rents could rise substantially to compensate investors for the loss of tax concessions due to coming changes to negative gearing.
The modelling has raised questions about the potential impact of the Jim Chalmers and Anthony Albanese tax reforms, while adding to concerns about an already tight rental market.
The government had forecast the changes would increase rents by just $2 a week, yet rents across many Sydney suburbs have already risen by significantly more than that, with about 60 per cent of suburbs recording rises in rents over the June quarter.
Recent listings also spotlight the scale of some individual increases.
A Darlinghurst apartment that was advertised for $1025 a week in 2025 is now listed at $1675 a week.
In Dover Heights, another apartment has risen from $790 a week in 2025 to $895 a week in 2026.
320 Liverpool Street, Darlinghurst was listed for $1025 pw in December 2025, now its listed for $1675 pw, according to property records
5/286 Military Road, Dover Heights has risen from $790 pw in 2025 to $895 pw in 2026, according to property records
Prior to the May federal budget changes, experts had already warned of 30 per cent rent hikes – highlighting the tax changes could deliver a similar result to when capital gains tax was first introduced in 1985 to 1987.
Nathan Birch, the head of property management firm Blink, which manages close to 7,000 rentals across the country, said the timing of such tax changes could be catastrophic for tenants.
Mr Birch said proposed changes could deliver a similar result to when capital gains tax was first introduced in 1985-1987. This change coincided with the Hawke government temporarily abolishing negative gearing.
The twin reforms drove a circa 30 per cent rise in rents in some capital cities over the two years.
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There were circa 30 per cent rent increases in some capital cities over two years following the Labor government negative gearing reforms in the 1980s. Picture: Mick Tsikas-Pool/Getty Images
NAB has since clarified that its 30 per cent figure was not a forecast but represented a hypothetical scenario showing how much rents would need to increase to make property investment attractive to new investors if dwelling prices remained unchanged.
Rental yields can increase through higher rents, lower property prices, or a combination of both.
“This was not a forecast and it is important to note that we do not forecast rental yields,” the NAB statement said.
“In reality, the adjustment will likely take place via a combination of lower dwelling prices and higher rents.”
Ray White also modelled a potential 30 per cent rental increase, but spotlighted that the figure represented a scenario in which property prices did not change.
The modelling examined how much rents would need to rise to restore the minimum investor yield following the removal of negative gearing benefits on established properties.
Ray White head of research Vanessa Rader said the combination of low vacancy rates and continued population growth was likely to keep pressure on both rents.
“We have really low levels of vacancy, we know that those investors that are in the market that have been grandfathered and they’re unlikely to sell unless they need to sell, but we continue to see population growth everywhere,” Ms Rader said.
“As a result, we need people somewhere to live, and so there is going to be that push and pull, if you like, on either values or rents.”
Ms Rader said investors were unlikely to return to the market unless there was a change in property values, rents or legislation.
“We don’t see investors coming into the market unless there is a change and it’s either got to be to value or to rent or a change in the legislation that allows for recovering the outgoings or all the expenses,” she said.
She said price corrections had already occurred across many locations while rents have already risen.
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Ray White Group head of research Vanessa Rader
“It is a worrying sign, but it really is an indicator that the policy decisions have made it quite difficult for renters,” Ms Rader said.
With vacancy rates remaining tight, particularly in Sydney, renters are increasingly changing the way they live to manage higher housing costs.
Ms Rader said more people were moving into shared accommodation and that the trend could accelerate if rents continued to rise.
“We’re seeing more and more people going into shared accommodation to combat the increase in rents and sharing those costs,” she said.
“We’ve seen more people moving further west and moving into bigger properties, which suggests that they’re sharing, as opposed to being in kind of single dwelling or independent dwelling units closer to the city.”
Sydney has also recorded growth in boarding house-style developments and co-living accommodation.
Ms Rader said these properties typically offered individual bedrooms, sometimes with a kitchenette and private bathroom, alongside shared living spaces.
“We might see more developers opt to build those sort of investment types, just to provide more affordable rental accommodation to people particularly in Sydney because the zoning does allow for it,” she said.
The rental pressure is already evident in recent data, REA Group figures show rents increased in about 60 per cent of suburbs across Greater Sydney for both houses and units in the three months to July.
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