By Kellie Andriessen – Director, Newcastle Property Management

One question I’ve been asked a lot recently is whether landlords should increase their rent because interest rates have risen again.

My answer is always the same—rental prices aren’t determined by a landlord’s mortgage repayments; they’re determined by the market.

While I completely understand that higher interest rates have increased the cost of owning an investment property, tenants don’t pay rent based on a landlord’s expenses. If that were the case, rents would have reduced over the past few years when interest rates fell dramatically—and very few landlords chose to do that.

The reality is that rental values are driven by supply and demand. The best indicator of this is the local vacancy rate. Here in Newcastle, vacancy rates have generally sat between 1.8% and 3% over the past 18 months, which is considered a balanced rental market. This information is something we include in our monthly landlord newsletters because it’s one of the most reliable indicators of where the market is heading.

When vacancy rates are low, demand generally supports stronger rental growth. As vacancy rates rise, tenants have more choice, making significant rent increases harder to justify.

One of the biggest risks I see is landlords trying to recover increased mortgage costs by pushing rents well above market value. While it may seem like the right financial decision at the time, it can result in a quality tenant deciding to move elsewhere. Suddenly, instead of receiving a slightly lower rent, the property is vacant and producing no income at all while advertising, inspections and reletting costs continue.

That doesn’t mean landlords shouldn’t review their rent each year. In fact, most good tenants expect an annual review and understand that moderate increases are part of renting. The key is ensuring any increase reflects the current market, not simply the cost of owning the property.

At Newcastle Property Management, every rent review is based on current market evidence, comparable properties and local vacancy rates—not emotion or interest rates. Our goal is to help landlords maximise their long-term return while retaining quality tenants whenever possible.

A great tenant who pays their rent on time and looks after your investment is incredibly valuable. Keeping rents aligned with market expectations is often the best way to protect both your income and your investment for years to come.