Australian rents have almost doubled in the past year
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Australian rents have almost doubled in the past year

The lack of housing supply and higher interest rates continue to put pressure on a tight rental market

By KANEBRIDGE NEWS
Wed, Jul 26, 2023 11:03amGrey Clock 2 min

Rents have risen more than 90 percent across Australia and almost two thirds of unit suburbs recorded an annual increase of at least 10 percent, new data has shown.

In news that will be no surprise to many tenants, the CoreLogic Mapping the Market report revealed that rents in Adelaide and Perth increased by 100 percent for both houses and units, while in Brisbane, rents for units also doubled, with house rents close behind recording a 99.6 percent rise. The cost of renting in Darwin also rose considerably for those living in units, up 100 percent on the previous 12 months. Those renting houses in the Northern Territory’s capital fared slightly better, with their rents increasing on average by 71.4 percent. 

It was a predictable story in the eastern states where rents in the two biggest capitals have jumped over the past year. In Melbourne, the cost of renting went up 98.1 percent for houses and 99.1 percent for units. The news was not much better for renters in Sydney where rents shot up by 91.9 percent for houses.

Despite consistently strong growth in house values in recent years, Canberra recorded the lowest annual rent rise for houses at just 2.5 percent while the cost of renting a unit increased by 56.1 percent on average. CoreLogic data shows rents fell in 18 unit markets in Canberra over the past year.

Regional areas also experienced rental hikes over the past year, with the cost of renting housing doubling in Western Australia.

CoreLogic Economist Kaytlin Ezzy said the lack of housing supply and interest rate rises were the main drivers for the increases.

“Investors tend to shy away from the housing market during negative economic shocks. The sharp rise in interest rates has coincided with a -23.6 percent fall in new housing investment lending between April 2022 and May this year, and this includes a slight recovery in investment lending in recent months, which has lifted 10 percent from a low in February this year,” she said. 

“On the demand side, record levels of overseas migrants, many of whom rent in inner-city unit precincts, has bolstered rental demand this year, causing an imbalance between rental demand and supply. 

“For Perth in particular, there is a persistent shortage of rentals, with total rent listings now about – 50 percent lower than the historic five-year average.”



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Why Prices of the World’s Most Expensive Handbags Keep Rising

Designers are charging more for their most recognisable bags to maintain the appearance of exclusivity as the industry balloons

By CAROL RYAN
Tue, Mar 5, 2024 3 min

The price of a basic Hermès Birkin handbag has jumped $1,000. This first-world problem for fashionistas is a sign that luxury brands are playing harder to get with their most sought-after products.

Hermès recently raised the cost of a basic Birkin 25-centimeter handbag in its U.S. stores by 10% to $11,400 before sales tax, according to data from luxury handbag forum PurseBop. Rarer Birkins made with exotic skins such as crocodile have jumped more than 20%. The Paris brand says it only increases prices to offset higher manufacturing costs, but this year’s increase is its largest in at least a decade.

The brand may feel under pressure to defend its reputation as the maker of the world’s most expensive handbags. The “Birkin premium”—the price difference between the Hermès bag and its closest competitor , the Chanel Classic Flap in medium—shrank from 70% in 2019 to 2% last year, according to PurseBop founder Monika Arora. Privately owned Chanel has jacked up the price of its most popular handbag by 75% since before the pandemic.

Eye-watering price increases on luxury brands’ benchmark products are a wider trend. Prada ’s Galleria bag will set shoppers back a cool $4,600—85% more than in 2019, according to the Wayback Machine internet archive. Christian Dior ’s Lady Dior bag and the Louis Vuitton Neverfull are both 45% more expensive, PurseBop data show.

With the U.S. consumer-price index up a fifth since 2019, luxury brands do need to offset higher wage and materials costs. But the inflation-beating increases are also a way to manage the challenge presented by their own success: how to maintain an aura of exclusivity at the same time as strong sales.

Luxury brands have grown enormously in recent years, helped by the Covid-19 lockdowns, when consumers had fewer outlets for spending. LVMH ’s fashion and leather goods division alone has almost doubled in size since 2019, with €42.2 billion in sales last year, equivalent to $45.8 billion at current exchange rates. Gucci, Chanel and Hermès all make more than $10 billion in sales a year. One way to avoid overexposure is to sell fewer items at much higher prices.

Many aspirational shoppers can no longer afford the handbags, but luxury brands can’t risk alienating them altogether. This may explain why labels such as Hermès and Prada have launched makeup lines and Gucci’s owner Kering is pushing deeper into eyewear. These cheaper categories can be a kind of consolation prize. They can also be sold in the tens of millions without saturating the market.

“Cosmetics are invisible—unless you catch someone applying lipstick and see the logo, you can’t tell the brand,” says Luca Solca, luxury analyst at Bernstein.

Most of the luxury industry’s growth in 2024 will come from price increases. Sales are expected to rise by 7% this year, according to Bernstein estimates, even as brands only sell 1% to 2% more stuff.

Limiting volume growth this way only works if a brand is so popular that shoppers won’t balk at climbing prices and defect to another label. Some companies may have pushed prices beyond what consumers think they are worth. Sales of Prada’s handbags rose a meagre 1% in its last quarter and the group’s cheaper sister label Miu Miu is growing faster.

Ramping up prices can invite unflattering comparisons. At more than $2,000, Burberry ’s small Lola bag is around 40% more expensive today than it was a few years ago. Luxury shoppers may decide that tried and tested styles such as Louis Vuitton’s Neverfull bag, which is now a little cheaper than the Burberry bag, are a better buy—especially as Louis Vuitton bags hold their value better in the resale market.

Aggressive price increases can also drive shoppers to secondhand websites. If a barely used Prada Galleria bag in excellent condition can be picked up for $1,500 on luxury resale website The Real Real, it is less appealing to pay three times that amount for the bag brand new.

The strategy won’t help everyone, but for the best luxury brands, stretching the price spectrum can keep the risks of growth in check.

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