Soaring housing rents launch inflation into orbit

CoreLogic reported that Australian rents grew by 9.5% in the year to June 2022 – the highest rate of growth since December 2007 when Australia was importing a record number of migrants.

Australian rental growth - June 2022

Rents soar across the nation.

Moreover, with immigration returning, unit rents are now growing faster than houses in Sydney and Melbourne:

“Such strong rental conditions through the current cycle have occurred largely in the absence of overseas migration, although the reopening of international borders is likely now adding further upwards pressure on rental demand,” Mr Lawless said.

“A reduction in average household size through the pandemic helps to explain such high rental demand during a time of closed international borders. Additionally, overall rental supply has probably been negatively impacted by the long running downturn in investment activity between 2015 and 2021.”

The trend in unit rents has turned around remarkably over the past year, after falling sharply in some cities early in the pandemic. Sydney and Melbourne unit rents are now rising substantially faster than house rents, with tenants taking advantage of more affordable medium to high density rental options.

With rental markets expected to remain tight, it’s likely rents will continue to outpace growth in housing values…

Rental stock has been tightening at the national level since September 2020. The flow of new rental listings is rising but remains more around 15% below the previous five year average, whereas total rental listings are 35% below average:

National rental listings

Record tight rental market.

With rental supply so tight, vacancy rates have tanked to record lows, led by the regions:

Rental vacancy rates

Rental vacancy rates at record lows.

As shown above, the capital city vacancy rate in May (1.3%) was tracking at less than half the decade average (2.9%). The situation is even worse across the regions, where the vacancy rate in May (1.0%) was tracking at less than one-third of the decade average (3.5%).

The surge in rents will also have ramifications for Australia’s inflation given the ABS rental series – measured as part of the CPI – rose by only 1.0% in the year to March 2022. This rental increase was less than one-fifth the rate of headline inflation (5.1%):

Annual change in rents

ABS is badly understating rental growth.

The ABS measures rents currently being paid across the market, whereas CoreLogic and the other private data providers measure newly signed rents.

Therefore, when the ABS eventually updates their rental series with the actual market, rents will lift sharply and add to the nation’s inflationary pressures.

Unconventional Economist
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  1. SkepticviewerMEMBER

    What’s the problem If you own six houses it’s happy days – ramp up immigration faster – higher rent costs more profit for those pollies who own multiple houses, no downside for the renter class. Everything else will be sorted out by, or provided for by some form of omnipotent being.

  2. MathiasMEMBER

    Apparently, a mate of mine reckons people who just pitch a tent in the bush and call it home are called ‘Gypsy’.

    I guess I must be a Gypsy then. I dont know why, but it feels truly bada$$ ;p

    I dont pay a single cent in rent and I have no intention to ;p

    They can put me in jail. I dont mind. Roof over my head and three meals a day.

    Australia still doesnt get what it wants.

  3. It’s only going to get much worse sadly, when Labor completely open the floodgates to mass immigration levels as promised by Brendan O’Connor yesterday. No concern by the rest of the media of course.

    • Jumping jack flash

      Perversely if all the developed countries do this simultaneously it may help to soak up the trillions of stimulus dollars plonked into the economy under the guise of COVID.

      An enormous amount of stimulus, curiously far greater than any effect that COVID actually had on the global economy… for absolutely no reason at all it seems, and nary a peep from anyone about it, or its effects on the economy except to say the resulting inflation caused by it was “transitory”.

      This strategy worked in 2008, and successfully sucked up that massive glut of cheap debt (and mining boom money – arguably US debt spent in China) that was magicked into existence between 2001 and 2006, causing similar effects.

  4. 2007 was not the result of Australia importing a record number of migrants, but an expansion of the ‘nebulous’ NOM net overseas migration (under the 12/16+ month residency rule), counting in more significant numbers of temporary churn over, namely international students; described as ‘migrants’ or ‘immigrants’ even if the majority have no intention of staying?

    Not only did the headline population data spike, (while ignoring growth of ageing oldie &/or baby boomer Australians & decline in fertility), it offered a dog whistle to deflect from fossil fuel regulatory constraints by blaming undefined (post 1970s-white Oz) ‘immigrants’ for environmental ‘hygiene’ issues and more perceived fuel for the FIRE sector…. prices (but not values) always go up…. so you’d better get in now.

    The question is, how did all of Australian media, academia, demographers, unions and politicians not only miss this significant statistical change, but were happy to be misled; which has impacted the quality of ABS data and analysis further?

    • Beetroot GEETROIT greater district oldies & some youngies literally being wheeled out of their houses by over stretched ambos on hourly basis. For sure paramedics the hardest working folk at the moment. Curious how many return, leaving hospital through the roof or front door??

      In any case whole blocks of triple fronted brick veneer 3 bedroom family homes remain empty/derelict waiting their turn to be shrouded in the sacred temporary fence of the sanctified property developer.
      Dog bless.
      More amusing than disturbing.
      For sure the country will be flooded shortly & ‘locals’ will join Mathias camping under the stars:((