Property rents sink deeper into abyss

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The Australian Bureau of Statistics (ABS) yesterday released consumer price index (CPI) data for the December quarter, which revealed that property rents fell sharply in 2020.

While property rents rose by 0.1% of the quarter:

Over the 2020 calendar year, rents fell by 1.3%:

The next chart plots rental growth across the capital cities:

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As you can see, six jurisdictions recorded rental declines in 2020, whereas two recorded positive growth.

In real inflation-adjusted terms, rents across the combined capital cities fell by 0.8% over the December quarter and by 2.2% year-on-year:

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In fact, real inflation-adjusted rents were 7.5% below their March 2015 peak, according to the ABS:

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The outlook for rents nationally remains poor given the forecast sharp fall in population growth due to collapsing immigration; although the impact will not be uniform.

According to the National Housing Finance & Investment Corporation’s (NHFIC) latest forecasts, released last month, Greater Melbourne’s and Greater Sydney’s housing markets will be thrown into deep structural oversupply in 2021 and 2022 as immigration collapses:

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This data points to further rental falls across Sydney and Melbourne, at least for the next two years. And this will weight heavily on rental growth nationally.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.