The June quarter consumer price index (CPI) data, released today by the Australian Bureau of Statistics (ABS), revealed a pick-up in rental growth at the national capital city level.
According to the ABS, rents nationally grew by 1.1% over the June quarter of 2013, which followed three quarters in a row of growth at only 0.8% (the equal lowest rates of quarterly rental growth recorded since June 2006):
However, on an annual basis, rental growth nationally slowed to 3.4% in the latest quarter, which was the slowest rate of rental growth since the June quarter of 2006:
It’s hard to say whether rental growth nationally is likely to accelerate or slow from here.
On the one hand, population growth has accelerated which, based on recent experience, suggests that rents may soon be on the rise (see next chart).
On the other hand, rental vacancies nationally are trending up, which suggests rental growth may weaken (see next chart).
Added to this, the labour market and income growth are likely to come under increasing pressure as the mining boom unwinds, which should also dampen rental demand. There is also the possibility of a significant supply response in the event that the RBA achieves its goal of lifting housing construction, which could also mitigate rental rises (although such an outcome would also support incomes and jobs).
As usual, there are a number of factors that could play out in any number of ways.
