Renters in Sydney and the rest of the country are being smashed by a fresh wave of price hikes that could also make life more expensive for homeowners.
PropTrack data showed Sydney rents grew 2.6 per cent over the March quarter, adding about $22 a week to the typical city rent. National rent increases were even higher at 4.6 per cent over the quarter.
Sydney rents grew 4 per cent annually, with ongoing rental supply shortages suggesting more rent increases were coming.
Economists warned the rental market has become one of the most dangerous pressure points in the inflation fight.
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There were nearly a 1000 fewer homes available to rent in Sydney than a year ago. Picture: Jeremy Piper
Rents are a core component of inflation. Every jump in weekly payments flows into the consumer price index – a gauge the RBA is trying to bring back into its 2–3 per cent target band.
In effect, rising rises could give the Reserve Bank another reason to hike interest rates within weeks.
That would cement what looks like an already strong likelihood of a rate hike, with markets currently expecting a 72 per cent chance of the RBA announcing an increase to the cash rate in May.
Median rent for a Sydney house is now $800 per week, while median weekly rent for a unit is $750.
Rental demand remains strong. Picture: NCA NewsWire
These prices put the Harbour City in a league of its own. Sydney rents were an average of $100 a week pricier than in Brisbane and $140 a week more than in Canberra.
There was an even bigger gap between Sydney and Melbourne, with Sydney rents an average of just under $200 a week pricier than in Melbourne, despite the city’s similar population size and economy.
Current rental supply suggests rent hikes could continue even in a climate of global economic uncertainty.
Figures from SQM Research revealed a tightening in the supply of available rentals, with the Sydney vacancy rate dropping to 1.1 per cent by the end of March.
About 1,000 fewer city rentals were available for tenancy than at the same time last year.
A vacancy rate below 2 per cent typically indicated a market where there is a shortage of rental accommodation, while a vacancy rate under 1 per cent is normally a sign of severe shortages.
RBA Governor Michele Bullock is expected to announce another rate hike next month. Picture: NewsWire / Gaye Gerard
REA Group economist Angus Moore said a silver lining was that rents were not growing as rapidly as they were in 2022 and 2023.
Part of the reason was that rents were already very unaffordable and many tenants had limited scope to pay more.
“Sydney remains the most expensive city to rent in,” he said. “Strained rental affordability, has slowed the pace of rent increases.”
Analysis of the latest CPI figures from the ABS showed an increase in housing costs, which included rents, was the biggest contributor to inflation over the year to March.
VanEck head of investments and capital markets Russel Chesler said the next release of inflation data at the end of April could be pivotal in determining the timing and scale of the next rate hike.
Sydney rents are by far the most expensive in the country. Picture: NCA NewsWire/Jeremy Piper
“The RBA faces a difficult balancing act, containing inflation without placing excessive strain on an already stretched consumer and tipping the economy into recession,” Mr Chesler said.
“The March CPI release, due at the end of April ahead of the May RBA meeting, will be a key determinant of the policy outlook.
“If recent trends in the US are any indication, inflation could rise from 3.7 per cent into the mid-4 per cent range.”
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