- It’s getting cheaper to rent a home in Australia, primarily thanks to Sydney.
- The nationwide annual change in weekly rents last year was the lowest since at least 2005.
- Rental costs makes up a significant part of Australia’ consumer price inflation (CPI) basket, and are therefore can be influential on interest rates.
It’s getting cheaper to rent a home in Australia, at least in aggregate terms.
According to CoreLogic’s latest Quarterly Rental Review, weekly rental rates across the country fell by 0.1% in December, leaving the drop over the December quarter at 0.3%.
From a year earlier, nationwide rents rose by 0.5% in weighted terms.
In the capital cities, where the vast majority of Australia’s rental stock is found, average rents fell by a larger 0.4% over the quarter leaving and were unchanged from a year earlier.
Both the national and capital city annual rates were the lowest on record dating back to when CoreLogic first started collating data back in 2005.
In regional markets, rental rates bucked broader the trend, lifting 0.3% on average over the quarter and by a larger 1.8% over the year.
This table from CoreLogic shows the average weekly rental rate by individual market, looking at the change over the past month, quarter and year, as well as gross rental yields for investors.
While nationwide rents went backwards during the quarter in weighted terms, the decline largely reflected that prices went backwards in Sydney, and were flat in Melbourne, masking modest gains in most other markets.
So in aggregate terms its becoming cheaper to rent in Australia, the truth is that largely reflects what’s happening in the Sydney, Australia’s largest rental market.
However, the decline in Sydney rents may have implications for Australia’s housing market beyond dragging down the average national rental rate.
Given it makes up a large part of the ABS consumer price inflation (CPI) basket at around 7%, the fall in rents, if replicated in the ABS data, may place additional downward pressure on headline Q4 CPI when it is released next week.
With financial markets already favouring that the RBA cash rate will be cut later this year, a big undershoot on inflation could see odds of further policy easing increase even further.