Beautiful one day, pricey the next

Renters in Queensland are experiencing the greatest rental pressure in the country, new data shows.

The Rental Pain Index released by content and research provider Suburbtrends shows the Sunshine State has seen the highest average rental increase in 12 months across the country at 16.33 percent.

“The significant increase in rental prices over the past year in Queensland is a clear contributor to the heightened rental pain felt by residents,” said founder of Suburbtrends, Kent Lardner. “Similar trends are observed in South Australia and Western Australia, where rental prices have risen by approximately 15.95 percent and 15.37 percent, respectively.”

The findings are the result of analysis of the top 25 rental results in each state comparing advertised rentals, vacancy rates and average rent increases over a 12 month period. It also examines average rents as a percentage of income.

The report comes on the back of data released by Ray White Real Estate which reveals that unit prices in Brisbane are growing at a faster pace than houses.

Ray White chief economist Nerida Conisbee said unit price growth has kept pace with that of houses, with apartment prices now back to their 2022 peak. She attributed the recent downturn in apartment prices to the lockdown lifestyle of the pandemic.

“Apartment living wasn’t much fun during lockdowns. Living in smaller spaces with restricted movement was difficult and a lot of the best things about urban living were not available,” Ms Conisbee said.

“Now that things are pretty much back to normal, apartment living is again attractive. Most of us are going back to the office more frequently and all the best things about living in higher density suburbs are back.

“We have moved quickly from a situation where there were too many apartments to not enough. Demand is exceeding supply, driving up prices and rents.”

Ms Conisbee noted that demand for apartments would continue to outstrip supply as building approvals were at their lowest point in more than a decade while construction costs were at record highs.

She said the future of the Australian residential market was apartment living, which is not reflected in current housing stock around the country.

“Australia has extremely low density relative to other major cities,” Ms Conisbee said. “Sydney is our highest density city but half of all homes are still detached houses. In Hobart, just 15 percent of homes are attached or apartments.”

The Reserve Bank had little choice but to raise interest rates again this week.

Inflation was already proving stubborn before the latest Middle East instability added further pressure to energy prices and supply chains.

Housing inflation alone has averaged six per cent over the past year, remaining one of the single biggest contributors to CPI.

But while the focus remains on rates, the deeper problem is structural and far more dangerous.

Australia is not building enough homes, and the conditions required to fix that are deteriorating simultaneously.

Construction costs remain elevated. Builders are increasingly unwilling to absorb contract risk. Labour shortages persist.

Capital is becoming more expensive. And as borrowing capacity weakens and sentiment softens, fewer projects are becoming financially viable.

The result is a self-reinforcing cycle.

The RBA raises rates to fight inflation. Higher rates reduce development feasibility. Fewer projects start. Housing supply tightens further. Rents rise. Inflation persists. The RBA raises rates again.

The only long-term solution is supply, yet Australia remains nowhere near the National Housing Accord target of 240,000 new dwellings a year.

Completion continues to lag approvals, meaning many projects approved on paper are simply never making it out of the ground.

That gap matters enormously because housing is not just another sector of the economy.

Around two-thirds of Australian household wealth is tied to property, while the sector underpins millions of jobs and related industries. Weakness here quickly spreads beyond real estate.

We are already seeing signs of stress. Auction clearance rates in Sydney and Melbourne have softened, borrowing capacity has declined, and parts of the market are experiencing price corrections as confidence weakens.

At the same time, policymakers continue to debate tax measures such as changes to negative gearing and capital gains tax discounts, despite fears that such reforms could drive private capital out of the rental market at precisely the moment when supply is most constrained.

This is the paradox at the centre of Australia’s housing crisis.

Demand for property remains extraordinarily high, yet the economic conditions required to actually build new housing are worsening.

The Reserve Bank cannot solve that problem alone.

Monetary policy cannot accelerate planning approvals, reduce construction costs or create more tradies. It can only raise the cost of money until something eventually breaks.

And increasingly, that “something” looks like the development pipeline itself.

Paul Miron is the Co-Founder & Fund Manager of Msquared Capital.

Beautiful one day, pricey the next

Low vacancy rates and rising rents make life tough on tenants in the Sunshine State while investors see strong capital growth

Rising rates, construction inflation and shrinking investor confidence are pushing Australia deeper into a dangerous housing spiral that monetary policy alone cannot fix.