Pandemic drives global housing rents through the roof

A new report released by the University of NSW (UNSW) and the Australian Council of Social Service (ACOSS) documents the extraordinary growth in housing rents across the Anglosphere over the pandemic:

At the national level, most of the Anglophone countries covered in this study (especially Australia, Ireland, New Zealand, the UK and the US) saw a brief initial reduction in general rent inflation (rent prices rising more slowly) at the start of the pandemic, followed by rapidly accelerating advertised rents during 2021. By late 2021, market rents for available properties in all of these countries were escalating at more than 8%…

The report notes that rental growth has been much stronger for houses than apartments:

Higher inflation of house rents in comparison with apartments (paralleling house/apartment sale price trends) seems to have likewise reflected ‘the race for space’ – housing consumption preferences more influenced by dwelling size than prior to the pandemic.

In most of the Anglophone countries, notwithstanding market turbulence since March 2020, the pandemic has seen rents rising ahead of earnings, implying worsening of rental affordability that will have in most cases compounded previous trends.

The report also shows that rental prices in Australia’s regional areas had risen by 18% in the two years to late 2021, easily outpacing growth across metropolitan areas:

Calibrated in terms of simple nominal media rents, the contrast between the 2020-2021 rent trajectories of Australian capital cities and non-metropolitan areas is even more stark – see Figure 6.5. During the two years to Q4 2021, regional rents rose by 18% whereas metropolitan rents had, by the end of this period only just recovered to their starting level.

In fact, as shown by more detailed (also previously unpublished) Domain statistics, the phenomenon of regional rents ‘outperforming’ the relevant capital city during this period was especially marked in New South Wales (+17% versus -2%), Tasmania (+26% versus +8%) and Victoria (+15% versus -7%) – see Figure 6.6. Also notable from Figure 6.6. is that Western Australia, where geographical isolation and a closed border largely enabled avoidance of economic restrictions during the first two years of the pandemic, the pattern was completely different.

The pandemic has been especially tough on the world’s youth. The sharp increase in rents has made it harder to save up a deposit at the same time as house prices globally have soared further out of reach.

Unconventional Economist

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