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Rental Price Growth at 25-Year Low

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Australia’s rental market is an important driver of activity in the residential construction market, and national rental price growth is at its lowest in 24 years.

Figures from the ABS Consumer Price Index were recently released for the December 2017 quarter, and revealed that the pace of rental price growth dipped to just 0.6 per cent in 2017.

According to HIA senior economist Shane Garrett, such a slow pace of growth has not been seen since 1993.

“For families reliant on the rental market, the deceleration in rents is welcome news,” he said.

“The slowdown in rental price pressures has been helped by the completion of large volumes of newly-built dwellings over the last couple of years.

Related reading: Building Approvals Fall 20% in December

“Investors, both domestic and foreign, have been instrumental in delivering this additional supply.”

The ABS’ rental market analysis has been a useful tool in Australia to measure activity in the residential construction market, and the scope of rental costs that will influence the decision to build or purchase.

Rental incomes act as a crucial determinant of investor activity, with higher rental returns providing higher incentives for investors to participate in the market.

The overall rate of inflation rose to 1.9 per cent during the December 2017 quarter, while the increase in general housing costs grew by 3.4 per cent over the year.

“This is predominantly due to rising electricity costs which rose by 12.4 per cent over the past 12 months,” Garrett said.

“Several countries’ central banks have started to lift their key interest rates.

“Taken with today’s inflation data for Australia and the fact that our labour market is tightening, we expect that the RBA’s next rate move will be upwards.”

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Article originally posted at: https://theurbandeveloper.com/articles/rental-price-growth-at-25-year-low