Reserve Bank of Australia (RBA) governor, Phil Lowe, told Monday’s Senate Economics Legislation Committee in Canberra that Australia’s rents will continue to soar in 2023 on the back of strong immigration, and that this will put upward pressure on inflation:
“The other supply side issue we are focused on is the supply of housing, because the rental vacancy rate now is quite low and the population growth is picking up”.
“I’m imagining that we’ll see increased pressure on rents over the next year as population growth collides with fairly modest growth in the supply of housing”.
CoreLogic reported 10% national rental growth in the year to October:
This was on the back of a rental vacancy rate of only 1.0% nationally, following a 30.8% decline in listings across the combined capital cities:
SQM Research, Domain and PropTrack have each recorded even stronger rental growth.
Rents comprise around 6% of Australia’s CPI basket, meaning it will make a sizable contribution to Australian inflation in 2023.
To add insult to injury, the Australian Bureau of Statistics (ABS) recorded only 2.8% rental growth in the year to September, which was less than half the headline rate of inflation (7.3%).
This is because the ABS measures rents paid across the market, whereas CoreLogic and the other private data providers measure newly signed rents.
Therefore, as the ABS’ measure catches up with the actual market, it will fan Australia’s inflationary flames and pressure the RBA to lift interest rates even higher.
