Australian rents are expected to soar the most since 2008 this year, further squeezing middle- and low-income household budgets amid rising costs of living, Westpac Business Bank said.
(Bloomberg) — Australian rents are expected to soar the most since 2008 this year, further squeezing middle- and low-income household budgets amid rising costs of living, Westpac Business Bank said.
Average prices will increase by up to 7.5%, on top of the 4% recorded in 2022, economists Pat Bustamante and Jameson Coombs said in a research note Wednesday. One-third of Australian households rent, and nominal household consumption could fall by as much as 1% this year, according to the note.
“Generally, renters are not well equipped to absorb this increase in housing costs — they tend to be a younger cohort, low- and middle-income households with lower savings,” they said. “These households will be required to pull back on spending to meet the higher rental costs.”
The ballooning prices will add to cost of living pressures in Australia, with data released Wednesday showing wages are growing at less than half the pace of inflation. The rental market is expected to come under further strain as migrants and international students return to Australia in record numbers, the economists said.
With the central bank expected to continue its tightening cycle to combat inflation, landlords will pass on higher borrowing costs by raising rents. Higher interest rates, together with rising construction costs, will also reduce the supply of new rental properties, according to the note.
More than 80% of Australians say there is a lack of affordable housing in their area and over half of those who rent feel trapped with few alternative options, according to the Property Council of Australia.
The Reserve Bank of Australia lifted the cash rate to 3.35% earlier this month, the ninth consecutive hike since May, and is anticipating further increases in its effort to tame stubbornly high inflation.
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