Rents, Rates, and Reality: What the next RBA meeting means for yields

The Reserve Bank of Australia's October 2025 decision to hold the cash rate at 3.60% has sent a clear signal: we're in a holding pattern, but the rental market isn't waiting around.

The Big Picture

With borrowing costs sitting at multi-year highs, the substitution effect is in full swing. Would-be buyers are staying in the rental market longer, and new buyers are increasingly priced out. The result? A rental squeeze that's delivering unexpected benefits to yield-focused investors.

What the Numbers Show

National rental vacancy rates:

Rental growth (last 12 months):

The rental market is doing the heavy lifting that price growth used to do. In Perth, median rents have jumped from $480/week in October 2023 to $568/week today—a $4,576 annual boost for landlords.

Strategic Implications

**For yield investors:** The current environment rewards quality over speculation. Well-located properties in supply-constrained markets are generating rental premiums that offset the impact of higher borrowing costs.

**Regional variations matter:** While Sydney grabs headlines, Perth and Brisbane are delivering superior rental returns. Consider diversification beyond the eastern capitals.

**Timing the cycle:** With the RBA signaling rate cuts aren't imminent until mid-2026, rental strength has runway. Properties purchased today at elevated borrowing costs may benefit from both rental growth and eventual rate relief.

The Forward View

The RBA's commentary suggests patience. Inflation remains stubborn above target, and the jobs market shows little slack. This environment favors rental demand over purchase demand—potentially through 2025.

For investors, the question isn't whether rates will fall, but whether rental growth can more than offset higher borrowing costs in the interim. Based on current trajectories, the answer appears to be yes—if you're in the right markets.

**Bottom line:** Focus on supply-constrained markets, quality assets, and manage gearing conservatively. The rental market is delivering returns that property price growth used to provide.