|
The reason for rents are going up is reasonably easy to explain - supply and demand.
On the demand side you have continued high immigration and increases in interest rates meaning that first home buyers who would ordinarily be moving from renting to buying can't afford to do it. So the population of renters is increasing. Because unemployment is very low and wages are rising then renters have the capacity to pay higher rents as well. On the supply side, over the past year or two investors who would have bought properties to rent out were discouraged by high interest rates and new housing construction is at very low levels. So there were constraints on supply.
When you get an increase in demand but constraints on supply the only thing that can move is rent, upwards. That's why rental vacancy rates are very low now and rents are climbing. Ultimately though this will all work itself out, as rents climb the yield on property improves and it becomes economic again to be a landlord, so supply will increase and rents increases will moderate.
|