Why Do Rents Increase?

Why Do Rents Increase? Understanding the Real Costs Behind Rental Prices

Rising rents are a hot topic across Tasmania, and understandably so. For tenants, rent increases can feel sudden and stressful. For landlords, rising costs can quietly add up year after year.

Recently, Peter Lees Real Estate’s Leanne spoke with Shayne on local radio to unpack why rents tend to increase and what’s actually happening behind the scenes for property owners. Here’s a clear breakdown of the key factors at play.

Why do rents typically increase over time?

There isn’t just one reason rents rise — it’s usually a combination of factors.

Inflation is a major driver. As the cost of goods and services increases across the economy, the cost of owning and maintaining a property rises too. Landlords often adjust rent to keep pace with these broader cost increases.

Another key factor is ongoing operating expenses. Property ownership comes with regular costs that tend to increase over time, not decrease.

Finally, market conditions matter. In areas where rental demand is high and vacancy rates are low — as we’ve seen in many parts of Tasmania — market rents naturally rise as competition increases.

The main costs landlords face

Many tenants are surprised by just how many ongoing expenses are involved in owning an investment property. Some of the most significant include:

Mortgage interest
Most investment properties are financed with loans. Even small changes to interest rates can add thousands of dollars to annual repayments, especially over multiple properties.

Council rates, land tax and water charges
Property owners are responsible for council rates, land tax and water rates. These charges typically increase over time in line with government budgets and infrastructure costs.

Insurance premiums
Landlord and building insurance is essential protection for both the property and rental income. Premiums have risen in recent years due to broader changes in the insurance market.

Maintenance and repairs
All properties require upkeep. From replacing hot water systems to addressing general wear and tear, maintenance is ongoing and unavoidable — and costs continue to rise with labour and materials.

Property management fees
When landlords use a professional property manager, there are management fees, lease renewal costs, and advertising expenses when a property becomes vacant.

Compliance and safety requirements
Landlords must meet legal safety standards, including smoke alarm compliance and other regulatory requirements. Staying compliant often involves annual checks and additional expenses.

So why does this lead to rent increases?

When these costs rise — often by 5% or more in a single year — landlords may need to review rent to keep the investment financially viable. In most cases, rent increases are carefully balanced against current market conditions and affordability.

It’s rarely about profiteering. For many landlords, rental income simply helps cover rising expenses and protect the long-term sustainability of their investment.

Advice for tenants and landlords

For tenants:
Open communication is key. If you’re concerned about a rent increase, speak with your property manager early. Understanding what’s driving the change can sometimes open the door to flexible solutions.

For landlords:
Planning ahead is essential. Building maintenance reserves, staying informed about tax incentives, and ensuring rent increases comply with Tasmanian residential tenancy laws can help avoid financial pressure and disputes.

A balanced conversation matters

Rising rents are a complex issue, influenced by economic conditions, government charges, and market demand. Understanding the full picture helps create more productive conversations between tenants, landlords, and property managers — and leads to better outcomes for everyone involved.

If you have questions about rent reviews, tenancy rules, or managing a rental property in Tasmania, the team at Peter Lees Real Estate is always happy to help.