By contrast, across the rest of the nation vacancy rates are tight and rental growth is strong.

According to Hugh Hartigan:

“When the rate of housing formation is low, as we’re seeing now, weakness in rents comes through, particularly in those areas affected by the shock. It’s less of a house price story. House prices are more driven by financial flows and credit.”

Obviously, we can expect rental vacancies to remain high and rents to remain weak across Melbourne and Sydney as long Australia’s international border remains shut to migrants and international students.

Immigration is the key driver of household formation and rental demand in these two cities, especially with respect to high-rise apartments.

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Unconventional Economist

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.

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