Annual growth in rent has hit a 14-year high as home buyers face rising interest rates.
The Reserve Bank on Tuesday announced a third hike in the cash rate in as many months, taking it to 1.35 per cent.
The 50 basis point rise – the third hike in three months – is estimated to add $137 a month to a $500,000 mortgage, or $499 per month on a $750,000 loan.
The RBA board has flagged further rises, with some economists expecting the cash rate to hit 3.5 per cent next year before the central bank starts to consider cuts.
The decision came as CoreLogic’s Quarterly Rental Review showed the national rental index increasing 0.9 per cent in the month to June and 2.9 per cent over the June quarter.
Dwelling rents are 9.1 per cent higher across the capital cities and up 10.8 per cent in regional areas compared to June 2021.
“This sustained period of strong rental growth has seen national dwellings record the highest annual growth in rental values since December 2008,” research analyst Kaytlin Ezzy said.
Canberra remains the country’s most expensive rental market, with the typical dwelling renting for $690 per week, ahead of Sydney which recorded a median rental value of $643 per week, and Darwin at $565 per week.
Melbourne replaced Adelaide as Australia’s most affordable rental market, with a typical property renting for $480 per week.
Adelaide’s rents increased to $492 per week, followed by Perth ($515), Brisbane ($547) and Hobart ($549).
The surge in rental demand has occurred largely in the absence of overseas migration and has instead been driven by low supply and shrinking average household sizes.
Reserve Bank governor Philip Lowe said the size and timing of future interest rate rises would be “guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market”.
The RBA is seeking to use a series of rate rises to get inflation back to its two to three per cent target range.
Inflation is sitting on 5.1 per cent and is expected to head towards seven per cent over the course of the year.
“The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,” Dr Lowe said in the post-decision statement.
CommSec’s Craig James said it was the biggest back-to-back rate hike since the cash rate was first targeted in 1990.
He said it reflected a global trend among central banks to “front load” rate hikes to get on top of inflationary pressures.
But the risk of such hikes is triggering a recession, or two consecutive quarters of declines in gross domestic product.
Treasurer Jim Chalmers said neither his department nor the RBA are forecasting a recession.
“I am confident in the long-term prospects for the Australian economy so long as we do our best to manage the … difficult combination of circumstances that we’re dealing with now.”
Shadow treasurer Angus Taylor said the Labor government had no economic plan to respond to rising inflationary and interest rate pressures.
(Australian Associated Press)