The RBA’s February rate hike caught many by surprise, but savvy property investors understand that inflation can actually work in their favor. Here’s how to turn rising costs into a wealth-building advantage.

RBA Rate Hike: What Happened in February 2026

The RBA was forced into an embarrassing policy reversal at its February meeting, raising the cash rate back to 3.85%, thanks to inflation surging again for consecutive months. The ABS released its latest Consumer Price Index (CPI) the week prior, which showed headline inflation coming in hot at 3.8%, up from the previous month’s 3.6%. The CPI has now been trending up for the last half a year, since bottoming out at 1.9% in June, 2025.

As it keeps rising, it gets further away from the RBA’s target, which is to have it sustainably within the 2-3% range… preferably around the 2.5% mark and RBA Governor Michele Bullock has admitted that she thinks it will take some time to get inflation back where it needs to be.

Where Does Housing Come Into It?

Housing is the most influential inflation measure in the CPI, as it accounts for more than 21% of the weighting. The next biggest category is food and non-alcoholic beverage, at about 17%. Housing inflation came in at 5.5% in the latest release, up from 5.2% the month prior. But mortgage payments aren’t measured in the CPI. Housing as a category includes construction costs and rent paid.

So, while homeowners have to pay more on their mortgages, thanks to the RBA hiking interest rates, property investors have an advantage over owner-occupiers. They can offset those payments with the inflated rent they are receiving from their tenants. If rental payments are 4 or 5% higher each year, there’s a good chance they’re still covering your rising mortgage repayments, especially if you have a positively geared portfolio and are paying interest only.

‘Under Control’ Inflation Is Still an Increase

If you have investment properties already, you’ll have noticed rents going up significantly for a number of years since Covid. Ask your parents what they paid in rent back in the day and they might tell you $20 a week. Right now, rents are more than $1000 a week in some capital city areas. People talk about inflation slowing down as if it means prices will stop rising once the RBA achieves its target. But your rental income will still be rising each year, just by a smaller amount.

The longer you hold onto your investment properties, the higher your rental income will be, while your debt will only ever go down or, if you’re paying interest only on your loans, stay where it is. Eventually, you will get to a place where 1 or 2 years of rental income could pay down the entire principal debt. Inflation will have made your debt irrelevant.

Hold On For Dear Life

In an inflationary environment, property is a reliable and high-performing asset. It has a physical, inherent value, which means it can’t simply disappear like a share price.

It also draws an income that benefits from inflation. The demand for rental properties isn’t going anywhere, because people need a place to live and buying a house has never been less affordable. Plus, vacancy rates have been around the 1% mark for a long time. There are not enough rental properties to go around. The added bonus is that property has a history of cyclical, but steady value growth over the long term.

The best way to make the most of property investment is to acquire quality assets and hold on. The assets will increase in value, while paying themselves off over time through rental income. You can also use equity from their value growth to expand your portfolio and purchase more assets that will pay themselves off over time. So, as inflation continues to surge, hold on to your property assets and go along for the ride. Eventually, you’ll come out on top.