CoreLogic’s housing market report revealed that national asking rents rose by 0.2% in October, with annual growth slowing to 5.8%.
This represented the smallest annual increase in rents since the year ended April 2021.
Source: CoreLogic
CoreLogic noted that the “easing in rental growth is good news for inflation” given that rents comprise one of the largest items in the CPI basket.
“The annual change in the rental component of CPI has already started to trend lower, falling to 6.7% in the September quarter, down from a recent high of 7.8% in Q1 this year”, CoreLogic noted.
“Commonwealth Rental Assistance (CRA) has likely dragged on rent growth, but the impact for the September quarter would have been marginal, with the increase to CRA kicking in for late September only”.
The following chart from Justin Fabo at Antipodean Macro shows the decline in CPI rents, which grew by 1.6% in Q3 to be 6.7% higher year-on-year:
The maximum rate available for CRA increased by 10% on top of the usual biannual indexation. However, the increase in the CRA only came into effect on 20 September. Therefore, it had only a minor impact on rents in Q3, but will have a larger impact in Q4.
Separate rental data from SQM Research tells a similar story, with the sharp decline in asking rents leading the decline in CPI rents.
Asking rents should continue to moderate on the back of affordability constraints, increases in group households, and slowing net overseas migration.
