ABS: Rental growth slumps to 22-year low

By Leith van Onselen

The March quarter consumer price index (CPI) data, released yesterday by the Australian Bureau of Statistics (ABS), revealed a further weakening of rental growth at the national capital city level.

According to the ABS, rents nationally grew by only 0.1% over the March quarter of 2016 – the lowest quarterly growth rate since March 1994. Rents were also up by only 0.9% over the year – the lowest annual growth rate since March 1995 – with a clear downwards trend evident (see below charts).

ScreenHunter_12724 Apr. 27 15.15
ScreenHunter_12723 Apr. 27 15.15

The ABS, of course, follows Core Logic-RP Data, which recorded falling annual rental growth for the first time on record in the year to April. As noted by Cameron Kusher:

“We have been tracking the annual change in capital city rents since 1996 and this is the first time we have seen rental rates falling.”

“The extra accommodation supply, as a result of the current building boom, along with the recent record high levels of investment purchasing is adding substantial new dwelling supply to the rental market at a time when the rate of population growth is slowing from quarter to quarter. Furthermore, wages are increasing at their slowest annual pace”…

“With dwelling approvals recently at record highs, construction activity set to peak over the next 24 months and many new properties still to settle, the rental demand weakness is expected to persist.

Indeed. It’s hard to see a rental rebound when average earnings are barely growing (negative after inflation):

ScreenHunter_12725 Apr. 27 15.20

And dwelling construction is running well ahead of population growth:

ScreenHunter_12726 Apr. 27 15.21

As the saying goes: “you cannot leverage rents”.

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