Rental inflation remained hot across the major capital city markets, according to SQM Research’s latest asking rents series:
This surge in rents comes amid the sharp decline in rental vacancy rates following record net overseas migration:
Research from CBA shows that rental inflation correlates directly with the ratio of population increase to apartment construction:
So other things equal, rental inflation will increase when either population rises or apartment construction declines.
The past two years have seen both phenomena happen at once, which is why rents have surged.
Thursday’s dwelling approvals data from the Australian Bureau of Statistics (ABS) added to the pain facing renters.
Annual apartment approvals across the combined capital cities collapsed to their lowest level since April 2012, with only 49,448 units approved for construction in the year to March:
As illustrated above, the volume of apartment approvals in March 2024 was less than half the 111,667 approvals recorded in the year to September 2016.
Moreover, the collapse in apartment approvals was concentrated in the three major capital cities—Sydney, Melbourne, and Brisbane:
The situation prompted a warning from Housing Industry Association Chief Economist Tim Reardon.
“The mismatch between rising demand from migration and constraints on the supply of housing is likely to see the acute shortage of housing stock continue to deteriorate”, Reardon said.
“This lack of new work entering the construction pipeline is occurring alongside record inflows of overseas migrants and a pre-existing acute shortage of rental accommodation across the country”.
As long as the federal government continues to run an extreme immigration policy into a supply-constrained market, the rental crisis will worsen.
The solution is to slash net overseas migration to a level below the nation’s capacity to build housing and infrastructure.
Otherwise, Australia will remain in a state of permanent rental crisis.
