Asking Rents Are Set To Surge
As vacancy rates plummet, rents could go up 15%.
2 min
A lack of available rentals which has seen vacancy rates plummet to a new 16-year low, may see asking rents surge by as much as 15% nationwide this year according to research by SQM.
Available stock dropped from 1.3% January to 1.2% of total rentals in February – the lowest since December 2006 when the vacancy rate hit 1.1%.
All markets were now in rental undersupply after vacancy rates fell below the 3% threshold for a balanced market and the imbalance had pushed asking rents to 9.4% nationally over the year to March 12.
This was the sharpest rise in five decades and spelled bad news for those hit by inflation according to SQM managing director, Louis Christopher.
“Because the rental market is seriously stretched right now, we could see rents rising by at least 10% nationwide over 2022,” Mr Christopher said.
Housing costs account for approximately 23% of the CPI basket and steep rent rises had major ramifications for inflation.
Mr Christopher added that vacancy rates are likely to fall again over March.
“The first week recorded yet another decline in rental accommodation listings, and the impacts of the flood have not yet been reflected in the data, so we can expect rental vacancy to tighten again,” he said.
Across the country, every city aside from Sydney and Melbourne posted less than 1% vacancy rate last month, while Sydney’s vacancy dropped to 2% and Melbourne’s to 2.3%.
Further, the vacancy rates for apartments in the CBD fell sharply during February, coinciding with the return of international students.
The proportion of rental apartment in the Sydney CBD left vacant dropped to 4.3% from 4.5% in January while Melbourne saw its CBD vacancy rates drop 1.2% to 2.8%.
Brisbane faired similarly with the vacancy rate falling 1.4% to 4.4% and Adelaide was down by 1% to 1.7%.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Philip Lowe’s comments come amid property industry concerns about pressures on mortgage holders and rising rents
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Leaders in Australia’s property industry are calling on the RBA to hit the pause button on further interest rate rises following yesterday’s announcement to raise the cash rate to 4.1 percent.
CEO of the REINSW, Tim McKibbin, said it was time to let the 12 interest rate rises since May last year take effect.
“The REINSW would like to see the RBA hit pause and allow the 12 rate rises to date work their way through the economy. Property prices have rebounded because of supply and demand. I think that will continue with the rate rise,” said Mr McKibbin.
The Real Estate Institute of Australia today released its Housing Affordability Report for the March 2023 quarter which showed that in NSW, the proportion of family income required to meet the average loan repayments has risen to 55 percent, up from 44.5 percent a year ago.
Chief economist at Ray White, Nerida Conisbee, said while this latest increase would probably not push Australia into a recession, it had major implications for the housing market and the needs of ordinary Australians.
“As more countries head into recession, at this point, it does look like the RBA’s “narrow path” will get us through while taming inflation,” she said.
“In the meantime however, it is creating a headache for renters, buyers and new housing supply that is going to take many years to resolve.
“And every interest rate rise is extending that pain.”
In a speech to guests at Morgan Stanley’s Australia Summit released today, Governor Philip Lowe addressed the RBA board’s ‘narrow path’ approach, navigating continued economic growth while pushing inflation from its current level of 6.8 percent down to a more acceptable level of 2 to 3 percent.
“It is still possible to navigate this path and our ambition is to do so,” Mr Lowe said. “But it is a narrow path and likely to be a bumpy one, with risks on both sides.”
However, he said the alternative is persistent high inflation, which would do the national economy more damage in the longer term.
“If inflation stays high for too long, it will become ingrained in people’s expectations and high inflation will then be self-perpetuating,” he said. “As the historical experiences shows, the inevitable result of this would be even higher interest rates and, at some point, a larger increase in unemployment to get rid of the ingrained inflation.
“The Board’s priority is to do what it can to avoid this.”
While acknowledging that another rate rise would adversely affect many households, Mr Lowe said it was unavoidable if inflation was to be tamed.
“It is certainly true that if the Board had not lifted interest rates as it has done, some households would have avoided, for a short period, the financial pressures that come with higher mortgage rates,” he said.
“But this short-term gain would have been at a much higher medium-term cost. If we had not tightened monetary policy, the cost of living would be higher for longer. This would hurt all Australians and the functioning of our economy and would ultimately require even higher interest rates to bring inflation back down.
“So, as difficult as it is, the rise in interest rates is necessary to bring inflation back to target in a reasonable timeframe.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
