Rising interest rates are delivering a double blow to Perth's renters, pushing up demand for rental properties while simultaneously choking off the supply of new apartments needed to ease the crunch.
RBA's rate hike adds pressure
The Reserve Bank of Australia (RBA) raised the cash rate to 4.35 per cent this week, marking the third increase in 2026. This rate environment is making homeownership less accessible, forcing more people to remain in the rental market and intensifying competition for available homes.
Perth's rental market is already under severe strain. According to REIWA data, the vacancy rate dropped to 2 per cent in March, tightening from 2.6 per cent in December and January, and 2.2 per cent in February. The median rent for a unit now sits at about $700 per week, with properties leasing in a median of just 15 days.
Supply side under threat
While the demand-side impact of higher rates is well understood, the supply-side consequences are less examined. Higher borrowing costs 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 challenging, but for Perth's rental market, the implication for new supply is unambiguous.
Triple threat to rental supply
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. Meanwhile, the end of the National Affordability Rental Scheme in June will return about 1,500 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.
