Treasurer Jim Chalmers insists rents will still only increase by $2 a week despite NAB’s stark 30pc warning

Treasurer Jim Chalmers is insisting rents will still only increase by $2 a week despite a major bank forecasting increases of up to 30 per cent to compensate for landlords no longer being able to negatively gear their properties.

National Australia Bank is forecasting that rents in Sydney and Melbourne could increase by 25 to 30 per cent over two years as a result of Labor’s Budget restricting negative gearing to brand new homes from July next year, if they were exchanged after May 12.

Despite those forecasts, Dr Chalmers is sticking by Treasury’s Budget prediction that rents would only increase by $2 a week for a household paying the median rent.

“Well, we haven’t changed the expectations that we printed in the Budget, and that’s for a very simple reason,” he told Sunrise host Natalie Barr on Tuesday.

Dr Chalmers noted NAB’s forecasts didn’t take into account the grandfathering provisions for landlords, who would be able to continue to negatively gear their investment properties if they owned them before Budget night.

“It doesn’t take into consideration a whole range of factors, whether it’s the grandfathering and the design of our policy, whether it’s developments in the housing market or in the economy more broadly,” he said.

“In fact, the NAB note itself recognises and acknowledges that it doesn’t take a lot of those things into consideration. And so it’s not a forecast for what they expect to see happen with rents. It leaves out a whole range of important considerations.”

Shadow treasurer Tim Wilson said it appeared Prime Minister Anthony Albanese’s Labor Government was in denial about their own forecasts.

“Now the Albanese government are denying their Budget dream isn’t coming true,” he said.

“The Albanese government was warned their higher taxes would increase rents, and kneecap first home buyers and now it is happening they’re gaslighting Australians because they’ve got their way.”

NAB’s head of Australian economics Gareth Spence on Monday released a note arguing a 3.5 per cent to 4.5 per cent in rental yields in Sydney and Melbourne, to account for Budget tax changes, would imply a 25 to 30 per cent increase in rents if property prices stayed the same or fell.

That’s based on the annual rental income as a proportion of a property’s value.

“In the end, the adjustment towards more attractive gross rental yields will likely require a combination of both higher rents and lower dwelling values,” he said.

Labor’s Budget is also replacing the 50 per cent capital gains tax for property price increases occurring from July 1, 2027.

A system of indexation for inflation will be introduced along with a minimum 30 per cent tax on gains.