Rental Inflation Soft

By Pete Wargent on 30 Oct 2015
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Delving into the detail behind the Consumer Price Index figures for the third quarter reveals that annual rental price growth in Australia is now tracking at its lowest level since June 1995, with rents up nationally by just +1.5 per cent over the year to September 2015.

The data series captured at the capital city level shows the cyclical nature of property prices and rents.

The national level figures show the marked contrast between rental price inflation in periods when investors and housing starts were knocked out of the market (1985-1987) and those where investors have flooded the market with rentals and construction has boomed (2012-date).

Naturally, significant variances are evident across the capital cities.

Annual rental growth remained steady in Sydney (+2.5 per cent), but was softer in Melbourne (+2.2 per cent) and Brisbane (+1.1 per cent), while Perth has now slipped into negative territory on this series (-1.6 per cent) after a big run-up through the resources boom. 

Looking at the annualised data reveals the softening trend, particularly in Perth.

In the smaller capital cities, Hobart appears likely to play host to a level of rental growth over the year ahead with vacancy rates in the Tasmanian capital having tightened sharply.

On the other hand Darwin has the opposite problem and has now sunk into negative territory, joining Canberra where annual rents have been negative since the first quarter of calendar year 2014.

Finally, a look at rental growth across 5 and 10 year time periods by capital city shows how the resources capitals enjoyed the bulk of rental growth until the end of the resources boom.

Economists are split on next Tuesday’s interest rate decision, with a fair number now plumping for further easing, though economists of the ‘big four’ banks are yet to join that particular party.

 

About the Author

Pete Wargent used a buy and hold approach to shares, index funds and investment properties to make his first million in his early 30s. He quit his full-time job at 33. He helps others do the same.

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