Rents continue to decouple from population

ScreenHunter_17 Jul. 16 08.30

By Leith van Onselen

The December quarter consumer price index (CPI) data, released today by the Australian Bureau of Statistics (ABS), revealed a continued moderation of rental growth at the national capital city level.

According to the ABS, rents nationally grew by 0.6% over the December quarter of 2013: the equal lowest quarterly rate of growth since September 2005 following the same result in the prior quarter:

ScreenHunter_963 Jan. 22 13.20

On an annual basis, rental growth nationally slowed to 3.0% in the latest quarter, which was the slowest rate of rental growth since the June quarter of 2006:

ScreenHunter_964 Jan. 22 13.21

The outlook for rental growth is unclear.

On the one hand, population growth is running strong, which logically suggests that rents should soon be on the rise. However, as shown below, rental growth appears to have recently decoupled from population growth (see next chart).

ScreenHunter_965 Jan. 22 13.23

One explanation for the above divergence is that rental vacancies nationally are trending up, which usually suggests rental growth may weaken (see next chart).

ScreenHunter_966 Jan. 22 13.30

Add to this the soft labour market (see next chart), and the outlook for the rental market is mixed, at least at the national level.

ScreenHunter_967 Jan. 22 13.41

[email protected]

www.twitter.com/Leithvo

12 Responses to “ “Rents continue to decouple from population”

  1. speculator says:

    rents decoupling from population growth usually means: housing oversupply

  2. drcole says:

    Rents track CPI and house prices double every seven years.

    Wow, this is going to end well.

  3. Dr Fixit says:

    The “Rental Growth Vs Population Growth” divergence looks quite significant which is great.

    I think landlords had better be cautious increasing rents given the exponential increase in vacancy rates recently. They probbaly should start to decrease rents to match the market or risk losing a tenant.

    • arescarti42 says:

      What you’ve described is exactly what is happening in Canberra at the moment.

      It’s been funny watching the more clueless landlords get to the end of their current lease and then whack the usual $10 p/w on top of what they were previously getting, only to have the place sit vacant for months.

      You can tell the ones that are highly leveraged, because after one or two months vacant, the asking price crashes, presumably around the point where they can no longer pay the loan without the income.

    • gregonomic says:

      We just refused to sign the contract on our new lease. We said we’re willing to stay on at the current rent on a 1 yr lease (instead of the 6 months they offered us), otherwise we’re gone.

      We moved out of our last place when the landlord increased our rent, and, as arescarti42 described, the place was advertised for 3 months after we left, and was eventually rented for $30 p/w less than what we were originally paying.

      Lesson for (little) landlords: if you need the money you’re already getting, don’t risk losing it.

  4. burgo100 says:

    just a hunch but would think that your % change in rents would track to % change in income quite closely?

    higher growth in rents seems to match up quite nicely with the divergence shown in NDI vs. Real GDP that Leith pulls out quite regularly…..

  5. Forrest Gump says:

    Have a look at the soaring vacancy rate in Perth. As supplied by REIWA since October last year:

    Date Vacancies
    9/10/2019 3885
    23/10/2019 3894
    7/11/2019 4044
    17/11/2019 4210
    26/11/2019 4322
    29/11/2019 4419
    10/12/2014 4578
    12/12/2014 4622
    8/01/2014 4890
    15/01/2014 4980

    • innocent bystander says:

      yeah. A few I know who bought recently have had trouble renting out, and vacancy rate is not that high really, around 2%? whereas isn’t 3% considered balanced?
      where I am renting (hills, with few rentals) the landlord has foregone the usual biannual rent hike.
      EDIT: just checked reiwa site and they say over 3% for Perth

  6. Forrest Gump says:

    I have simply been monitoring the data. My point about the above figures provided weekly by REIWA from their web site is as follows.

    For each of the above weeks, there is around a 1.2% increase in available rentals over the previous week.

    But REIWA maintained the vacancy rate at 3.0% since October last year!

    Yes I know that the above figures are most likely understated (diluted somewhat), but even if they are not, the vacancy rate is well and truly on the way up.

    Anyone that is buying in Perth as a rental has rocks in their head.