While property prices could fall in 2024… rents will continue to soar

- November 24, 2023 2 MIN READ
Rents are soaring

Rent increases are one of the biggest factors fuelling our inflation rate, keeping it high and forcing the RBA to keep interest rates high.

According to SQM Research’s Christopher’s Housing Boom and Bust Report, that pressure on inflation from rising rents is not going away next year.

SQM’s overall capital city forecast is for rents to rise again next year by between 7 and 10 per cent… that’s double the inflation rate.

Perth is expected to record the largest increase of market rents of 12-15 per cent, while Canberra is forecast to record the largest declines of 2-6 per cent. Over the last year combined capital city rents have risen 15.2 per cent and 9.2 per cent in the regions.

The reason is what I’ve been talking about for months: a lack of new properties available for rent. Completed new dwellings for 2023 is expected to be around 175,000 while the population is expected to grow by 575,000 people.

Australia's population growth

There are simply not enough properties available to house people. Since January 2020, combined capital city market rents have risen by 40.5 per cent – the fastest rise in rents since the 1970s.

2024 dwelling rents forecast

SQM’s rental market assumptions for 2024 include population expansion slowing back to 455,000 people, and dwelling completions falling to 153,000. If SQM is right about its assumptions, it will mean a further shortfall of about 20,000 dwellings for next year. SQM does expect tenants to respond with increased sharing (a rise in the number of occupiers per dwelling).

If migration does not slow as expected it is likely rental increases will be greater than forecast. Any better-than-expected building completion rates would help alleviate the shortfall.

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