Rents rising 10x faster than Treasury forecast: what's actually driving the July 2026 surge

G'day.

If you've been near a landlord forum this week you'll have seen the headline: rents are climbing more than ten times faster than Treasury told the cabinet they would when the negative gearing bill was costed back in May. That's not a beat-up — it's straight out of CoreLogic's July rent index and news.com.au's follow-up analysis on Tuesday. And it's arguably the single most consequential number in Australian property right now.

I've had three separate messages this week from PropAlly users asking variations of the same question: "Should I lift my rent before January?" The honest answer is more nuanced than either the tabloid framing ("greedy landlords cashing in") or the industry framing ("just recovering costs") suggests. Let's walk through what's actually happening.

What the data shows

• CoreLogic July rent index: national advertised rents up 2.1% in the month of June alone — the sharpest monthly rise since the 2023 rent shock. Year-on-year advertised rents are up 8.4% nationally.
• SQM Research: capital-city asking rents hit a record high in the first week of July. Sydney houses now average $1,120/wk asking (up 9.1% YoY), Melbourne $780/wk (up 7.8%), Brisbane $760/wk (up 11.2%), Perth $820/wk (up 13.4%).
• Treasury's May costing assumed rents would grow around 0.8% annually above baseline as a result of the CGT/negative gearing changes. Actual advertised growth since the bill's introduction is running closer to 8–9% annualised — the "ten times" number the news.com.au piece led with.
• Your Investment Property Magazine (Tuesday) and Elite Agent (Wednesday) both cited PIPA and REIA surveys showing 68% of surveyed investors have either lifted rent since May or plan to before January 2027.
• Melbourne investor sell-offs are also climbing — news.com.au's Wednesday piece documented Victorian investors listing rentals rather than absorb the CGT changes, which tightens supply further and pushes rents up on the properties that stay in the pool.

For context: Treasury's model assumed most landlords wouldn't change behaviour before grandfathering kicked in. The market has now voted, and the answer is: they will.

Why now, and why so fast

Three things are stacking:

1. The January 2027 grandfathering cutoff. Properties held on or before 31 December 2026 keep existing negative gearing treatment; new tenancies started after that face the tighter rules. There's a real (and rational) incentive for landlords to reset rents to market before their current lease renewal so their post-2027 baseline is higher.
2. Serviceability changes. We covered the June borrowing-capacity cuts — landlords refinancing under tighter serviceability need higher rental income on file to hold their existing loan structure. Rent reviews on renewal aren't optional for many; they're required by the lender's DSCR test.
3. A genuinely tight rental market. SQM's vacancy rate is 1.2% nationally and under 1% in Perth, Adelaide and Brisbane. Even without tax reform, landlords could lift rents in this market and find takers. The tax change didn't create the tightness — it just accelerated the pricing decision.

What the ATO and states are actually watching

This is where a lot of landlord-forum advice goes wrong. Two live risks worth flagging:

Retaliatory rent increases: In NSW, VIC, QLD and the ACT, tenants can challenge rent increases they believe are retaliatory or "excessive" relative to comparable market rent. VCAT and NCAT have both signalled in recent decisions they will scrutinise increases above ~6% more heavily. If your evidence for a 12% rent bump is "my accountant told me to before January", you will lose that hearing. If your evidence is a rental appraisal from a licensed agent plus three genuinely comparable listings, you probably won't.

ATO scrutiny of "pre-transition" restructures: The ATO issued a discussion note on 4 July flagging that arrangements designed to artificially inflate 2026 rental income to lock in higher grandfathered deductions will be reviewed under Part IVA. Legitimately renting at market? Fine. Backdating leases, related-party arrangements, or structuring to shift income into the grandfathered window? Not fine.

Should you lift the rent?

Here's the framework I'd use — and it's the same one I've been giving in DMs:

Lift toward market if all three are true:

• Your current rent is more than ~5% below fresh comparables in your suburb (get a written appraisal, don't guess).
• You have 60+ days before the tenant's next renewal — enough notice to comply with state notice periods (VIC 60 days, NSW 60 days, QLD 2 months, WA 60 days).
• The tenant relationship is strong enough that a fair, well-explained increase doesn't trigger a departure you can't afford in a market where re-letting still takes 2–3 weeks even in a tight cycle.

Don't lift the rent (or lift only modestly) if:

• Your rent is already at or above market. Chasing "1 more year of negative gearing" is a false economy if the tenant leaves and you sit vacant for a month. Vacancy at $650/wk costs you $2,600 — more than a full year's tax uplift for most portfolios.
• The property has known maintenance issues you haven't addressed. VCAT and NCAT explicitly weight "condition of premises" when assessing whether an increase is excessive.
• You're planning to sell before January 2027 anyway. The 2027 CGT changes only bite on gains after that date; your current rent has minimal impact on your sale outcome.

What tenants are actually experiencing (and why it matters)

The news.com.au "10 times the pain" piece is emotive but the underlying numbers are real. The average renter in Sydney is now paying an extra $105/week compared to July 2025 — roughly $5,460 a year out of after-tax income. Treasury's model assumed this transfer would be small and gradual. It isn't.

Politically, that's the reason a rental cap discussion paper appeared on the Housing Australia Future Fund agenda for next month. It probably won't pass — federal rent caps are constitutionally awkward and Labor has said repeatedly it's not on the table — but the fact that it's on an agenda at all tells you which way the wind is blowing. If landlord behaviour between now and January genuinely does drive an 8–9% national rent print for two quarters running, expect state-level rent-cap conversations to accelerate (Victoria already has draft language in a portfolio holdings review).

The point for landlords: pushing rents to the absolute ceiling this cycle risks provoking a policy response next cycle. Restraint isn't just tenant-friendly — it's regulatory-risk-friendly.

What this means for your PropAlly setup

A few practical bits if you're actively managing:

• Log your rental appraisals. If you do lift the rent, save the written appraisal and any comparable-listing screenshots against the property. If it's ever challenged at tribunal, you'll want that evidence available in one place — not "on my phone somewhere". The evidence upload on your Rent Reviews tab is designed for exactly this.
• Set a January reminder. Your existing depreciation schedules and interest deduction records are still valid through the grandfathering window. Add a January 2027 review reminder so your tax pack cleanly separates pre- and post-grandfathering treatment.
• Watch your DSCR headroom. If you're planning a refinance in the next 6 months, your lender will assess against actual rent not market rent. Documenting a legitimate market rent increase now — with proper notice — strengthens your refinance case.

The bigger picture

I don't love where this is heading. Landlords are behaving rationally within a set of rules that was hastily costed and clearly under-modelled the behavioural response. Tenants are paying the difference. Treasury will need to revise its forecast in MYEFO in December and that will be a political story of its own.

For what it's worth: the landlords I know who are handling this best aren't the ones lifting rents to the ceiling. They're the ones sitting down with their spreadsheet, doing a proper market-comparable review, moving to fair market rent with proper notice, and keeping their tenants stable through what's about to be a very messy political summer.

We'll cover MYEFO here when it lands. If the 8%+ rental print holds through Q3, expect the negative gearing debate to reopen — not close.

Cheers, Tob

Sources

• CoreLogic July 2026 Rental Value Index (release, 8 July 2026)
• SQM Research weekly asking rents, week ending 6 July 2026
• news.com.au, "Tenants hit with rent rises more than 10 times higher than government predicted", 8 July 2026
• news.com.au, "Victorian property investors ditch rentals after budget tax changes", 8 July 2026
• Your Investment Property Magazine, "Investors raise rents as negative gearing changes near", 8 July 2026
• Elite Agent, "Landlord Tax Changes Driving Australian Rent Surge", 8 July 2026
• Australian Property Review, "Negative gearing changes could hit investors", 8 July 2026
• ATO discussion note on Part IVA and transitional negative gearing arrangements, 4 July 2026
• PIPA / REIA quarterly investor sentiment survey, Q2 2026