Record-High Australian Property Rents Likely to Keep RBA on Edge

By James Glynn

SYDNEY--Australian property rents have hit a record high, deepening fears the surge upward over recent years will continue to add to inflation and maintain upward pressure on interest rates.

Property research group CoreLogic estimated that the national median rent value ticked up to 601 Australian dollars (US$396.48) per week in December, equating to median annual rent of A$31,252 a year, a new record.

Eliza Owen, head of research at CoreLogic, said in a report published Tuesday that the median has increased markedly from $437 per week in August 2020, pushing annual rent values up by more than A$8,000 since then.

The rental surge comes as weak housing supply has clashed with a big jump in migration as students and foreign workers have flooded back into the country at a record rate following the end of Covid-19 lockdowns.

The Reserve Bank of Australia warned recently that the country has a "homegrown" inflation problem, citing rising rents as a key area of concern.

Fourth-quarter inflation data is due next week, setting the scene for the RBA's first policy meeting for 2024 on Feb. 6.

With interest rates in Australia still well below the peaks seen in other major economies, there's still a risk that the inflation data will be enough to trigger a further interest-rate hike, which could take the official cash rate to 4.60%.

The International Monetary Fund warned last week that the RBA needs to "tighten further to ensure inflation comes back down."

Recent growth in rent values, which averaged 9.1% a year for the past three calendar years, stands in stark contrast to the average annual growth rate of 2.0% in the 2010s, Owen said.

Median rents across the capital city markets ranged from A$745 per week in Sydney to A$535 per week in Hobart, Tasmania.

Canberra and Hobart were the only markets to see a decline in rent values through 2023, down 1.9% and 3.5%, respectively.

But while annual growth in rents is higher than historic averages, it has broadly slowed, Owen said.

In 2023, rent values rose 8.3%, down from a peak of 9.6% in the year to September 2022, the data showed.

The slowdown has been most evident across regional Australia, where rents rose 4.3% last year, down from a 13.4% increase in the year to August 2021, according to CoreLogic.

The slowdown in capital city rent growth began more recently, easing from a peak of 10.6% in the 12 months to April 2023, to 9.8% by the end of 2023, it added.

Write to James Glynn at [e-mail]

(END) Dow Jones Newswires

01-22-24 0815ET