Rents are rising, and we don’t need the data to tell us because Aussies in the thick of it already know.
But the data does confirm that rent values rose for a 35th consecutive month nationally in July. However on a positive note, monthly rent growth has eased over the past four months.
In regional Australia, rent value growth has been slowing since April last year, and rents are close to flattening out (albeit at high levels), according to CoreLogic.
The Corelogic research said there were three clear signs rent growth could slow even more next year. This is what they are.
1. Interest rates may fall
Rents move with interest rates, and interest rates could be on the way down next year, CoreLogic said.
In 2024, each of the major banks is now forecasting a decline in the cash rate. A reduction in interest rates could increase demand from housing investors, and increased investment purchases add to rental supply, which may serve to lower rent growth.
2. Aussies are getting small pay rises
During the pandemic wages went up thanks to major fiscal packages set out by the government, and the lack of skilled migrants coming into the country saw a major push for businesses to attract new staff.
Income growth was likely one of several factors that contributed to the break-up of share houses through the pandemic, CoreLogic said.
People could afford leases on more spacious properties, which contributed to fewer properties being available to rent.
However, income growth could be another metric that slows next year. Monetary policy is taking effect in reducing demand in the economy - the unemployment rate rose to 3.7 per cent through July.
“As income growth slows, renting households may look to adjust their housing situation, and re-form share houses,” CoreLogic said.
3. Aussies simply can’t afford ever-rising rent prices
High rent prices mean Aussies have been spending far more of their income on rent. In March, Aussies were spending around 30.8 per cent of their income on rent - the highest since June 2014.
CoreLogic’s measure of rents increased 29.3 per cent since a low in August 2020, or the equivalent of a rise in median weekly rents of $134.
“Rent value growth is likely to slow because of base effects alone, but renters also tend to be on lower incomes, which means there could be a ceiling on how high rents can go before tenants adjust their housing preferences,” the CoreLogic report said.