The Reserve Bank chief unveils the simple math equation that proves Australia’s rent and house price crunch is only going to get worse – and all because of a flood of migrants
- Reserve Bank governor criticizes population growth
- Philip Lowe linked it to higher rents and house prices
Australia’s most powerful banker has linked record-breaking population growth through immigration to higher rents and soaring house prices.
Reserve Bank of Australia Governor Philip Lowe has hinted that the housing supply crisis is likely to only get worse as construction fails to keep up with demand.
A record 400,000 new immigrants will arrive in Australia this fiscal year, with population growth at 1.7 per cent among the highest in the developed world.
“The other thing that’s happening now is a big increase in population,” said Dr. Lowe before the Senate Commerce Committee on Wednesday.
“The population will grow by two percent this year.
“Are there two percent more houses?” No. The rate of growth in the housing stock is very low.
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Reserve Bank of Australia Governor Philip Lowe has hinted that the housing supply crisis is likely to only get worse as construction fails to keep up with demand
“We have a lot of people coming into the country, people who want to live alone, that doesn’t work.”
“Unfortunately, the way this is eventually calming down is leading to higher house prices and higher rents.”
An ANZ CoreLogic report released this week showed that renters across Australia are spending 30.8 per cent of their income paying for a lease, the highest since June 2014.
This coincides with a slump in building permits, with the 8.1 percent drop in April hitting the lowest level since 2012, Statistics Australia said on Tuesday.
dr Lowe suggested that more younger Australians would continue to live at home with their parents.
“When rents go up, people choose not to move out,” he said.
An ANZ CoreLogic report released this week showed that renters across Australia are spending 30.8 per cent of their income paying for a lease, the highest since June 2014 (pictured is a rental viewing queue in Sydney).
Australia’s population growth history
1881: 2.3 million
1918: 5 million
1959: 10 million
1981: 15 million
1991: 17.4 million
2004: 20 million
2013: 23 million
2016: 24 million
2018: 25 million
2022: 26 million
Source: Australian Bureau of Statistics
The nationwide rental vacancy rate is at a record low of 1.1 percent after more people chose to live alone during the pandemic, prompting a surge in immigration as Australia reopened to skilled migrants and international students.
“The underlying issue here is supply and demand in the rental market,” said Dr. Lion.
“Vacancies are very low in many cities, the rental vacancy rate is lower than ever.”
“During the pandemic, the average number of people living in each household has declined.
“People wanted more space, they were working from home.”
Migrants, fed up with expensive rents and earning higher salaries, would be more likely to buy their own home to live in.
The average house price in Sydney rose 1.3 percent in April to an even more prohibitive $1.254 million, CoreLogic data showed, despite the Reserve Bank raising interest rates 11 times last year.
Property prices also rose in Melbourne, Brisbane, Adelaide, Perth and Hobart.
While tighter monetary policy has caused property values to fall over the past year, prices have historically rebounded once interest rate hikes stopped.
Treasury budget papers project a record 400,000 immigrants on a net basis in 2022-2023, followed by another 315,000 in 2023-24.