Louis Christopher – SQM Research
The overall capital city forecast is for the market (asking rents) to rise again next year by between 7% to 10%. Perth is expected to record the largest increase in market rents of 12% to 15%. While Canberra is forecasted to record the largest declines of -6% to -2%. For the past 12 months to the 20th of November capital city combined market rents have risen by 15.2%, while overall national rents, encompassing regional Australia have risen by 9.2%.
The severe mismatch of completed new dwellings for 2023 (expected to be approximately 175,000 dwellings) compared to an additional population expansion of some 575,000 people, has driven yet another year of market rental surges. Since January 2020 combined capital city market rents have risen by 40.5%. This is likely the fastest rise in rents since the 1970s.
SQM’s rental market assumptions for 2024 include population expansion slowing back to 455,000 people, and dwelling completions to fall to 153,000. If SQM is right about its assumptions, it will mean a further shortfall of some 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 forecasted. While any better-than-expected building completion rates would somewhat help alleviate the shortfall.
Commenting on the rental forecasts, Louis Christopher, Managing Director of SQM Research said “Coming towards the end of 2023, the rental markets remain in severe, critical shortage. Given what we know is in the pipeline for dwellings under construction, Australia is looking set to build less in 2024 than what was built for 2023 (an estimate of 175,000 dwellings). I hope I am right about our forecast slowdown in migration rates, for if we have another year like 2023, we are going to have a very sharp rise in homelessness and the community anger on housing will be immeasurable. In such a situation, I believe it would be a change of Government event. “As it is, the supply/demand imbalance is here to stay for another year which will likely mean further market rental increases of 7 to 10%.”
More on Christopher’s rental forecasts can be found in Christopher’s Housing Boom and Bust Report, 2024.