Rents, home lone numbers both up

RENTS are still going up but are starting to find a ceiling as tenant budgets can be stretched no further.

National rents as tracked by property data firm CoreLogic lifted 1.6 per cent in the three months to September, down from a 2.2 per cent jump in the June quarter.

The pace of growth has wound back a little even as national vacancy rates, the percentage of properties available, found a new record low of 1.1 per cent in September.

A persistent shortage of listings, combined with more people moving to Australia and fewer leaving, were largely to blame for the extremely low rental availability.

CoreLogic economist Kaytlin Ezzy said the affordability ceiling in part explained the unusual combination of slower rent price growth and a falling vacancy rate.

Rental values have lifted a material 30.4 per cent since July 2020, with the average renter now forking out nearly $140 extra a week.

“With the rising cost of living adding additional pressure on renter’s balance sheets, it is likely tenants have hit an affordability ceiling, seeking to grow their households to share the growing rental burden,” Ms Ezzy said.

Rents grew in every major city aside from Canberra and Hobart, with the latter bumping aside Adelaide as the capital with the lowest median rent.

Darwin rents grew the fastest, lifting 3.3 per cent, followed by Brisbane, which recorded 2.5 per cent growth over the three months.

The other capital cities all recorded growth but not as fast as in the quarter before.

Separate reports by real estate companies PropTrack and Domain also recorded growth over the September quarter.

Domain chief of research and economics Nicola Powell said Australia was firmly a landlord’s market.

Dr Powell said rental supply had suffered from a lack of new construction and investors selling due to higher holding costs.

“To balance the rental market and achieve a healthy vacancy rate of two-three per cent, Australia needs 40,000 to 70,000 additional rentals,” she said.

The property firm recorded a new record high of $600 for median weekly asking rent for houses across the nation, marking a 13 per cent increase from last year.

Meanwhile, home loan lending numbers returned to pre-pandemic levels among home buyers who are planning to live in the property.

Owner-occupier loans are still well down from a peak in January 2021 when the real estate market was booming.

Australian Bureau of Statistics data for August revealed a 2.5 per cent lift in new owner-occupier loan commitments for dwellings over the month.

New loans for this cohort were still 12.3 per cent lower compared to the same time last year.

Lending by property investors also ticked up over the month, improving 1.6 per cent, but remained three per cent lower than 12 months prior.

The pick-up in lending comes as a recovery in home prices continues, with national values as tracked by CoreLogic up 0.8 per cent in September, from 0.7 per cent in August.

National home prices are now just 1.3 percentage points shy of the record levels reached in April 2022.

The ABS also recently released latest building approvals data.

The August dataset showed building applications approved by government lifted seven per cent, which followed a 7.4 per cent fall in July.

The improvement included a 5.8 per cent lift in private sector houses, which followed three months of stable movements.

Oxford Economics Australia senior economist Maree Kilroy said home approvals had probably found a floor but remained at low levels.

New dwelling starts were likely to slide below 150,000 this financial year, she said.

“The mix of higher interest rates, delays and rising build costs have made it a challenging environment for new home buyers and developers alike,” she said.

Record migration was helping to support markets for established homes, fuelling growth in rents and home prices.

“For new dwellings however, the relay of this will take a few years to play out.”

Commonwealth Bank economist Stephen Wu said dwellings approvals were near record lows if considered on a per capita basis, with the building slowdown coinciding with a sharp uptick in population growth.

“We anticipate this weakness will continue for the remainder of 2023 before more favourable economic conditions stimulate the sector next year,” he wrote in a note.

– POPPY JOHNSTON/ AAP