I’ve never seen a rental market like this
So about two years, on the tail end of Covid, ago I was pointing out how crazy the rental market was getting.
And I was saying that there were no signs I could see that were going to slow the rental market down.
Fast-forward a couple of years, and I’ve been proved right.
In fact, it’s been wilder than even I could imagine.
Latest data from SQM suggests that rents are growing at 16% a year. That’s wild.
Especially because I still can’t see anything that’s going to slow the pace of price growth down.
Not with vacancy rates at the cray-cray craziest levels ever recorded in human history.
The national vacancy rate has fallen to 1 per cent, while Perth and Adelaide have the tightest markets in the country with their vacancy rates at 0.4 per cent, according to SQM Research.
What? 0.4%? How do you even make sense of a number like that?
And while we’re growing at a clip of 16% a year, things are actually accelerating. Check out the numbers for the past month. Ba-na-nas.
An undersupply in housing, coupled with a surge in migration has pushed rents higher in most markets. The average rent across Sydney houses rose 1.5 per cent in the past month to $1013, and increased 1.3 per cent for all dwellings to $815. House rents in Adelaide jumped 1.9 per cent to $603, according to SQM Research.
In Perth, houses rents are up 1.4 per cent in the past month, to $731. In Melbourne, house rents are up 19 per cent in the past year to $703. Only in Canberra and Hobart have rents fallen in the past 12 months.
The gains are broad-based, and because rental inflation is part of the CPI-basket of goods, it creates a headache for inflation and the RBA:
“Vacancies have been tightening again across the nation. They are tightening in our regions as well as our cities.”
Mr Christopher said the prospect of rents easing over the next six months was “very unlikely to occur” in the current conditions.
“And most likely, market rental increases will continue to rise between 10 and 15 per cent. Such rises will continue to work against the RBA’s objective of bringing back inflation to 2 per cent to 3 per cent.”
The only thing that might save us is either a complete collapse in immigration, or a sudden flood of new housing supply, neither of which seem at all likely.
As the RBA noted last week, housing starts are actually collapsing, and the balance is getting worse:
“Housing supply has not kept pace with the increased demand for housing – the result of a decrease in average household size since the beginning of the pandemic, robust nominal income growth and the increase in population growth,” the RBA said on Friday.
“Advertised rents have increased 30 per cent since prior to the pandemic, much more than the increase in CPI rents so far. Together with historically low vacancy rates, and little sign that tight rental market conditions will ease in the near term, this is expected to keep rent inflation elevated for some time.”
Yep, there’s no end in sight. 16% p.a is the new normal.
JG.
Ale says
Jon your material & contacts are so informative. Good value