Reserve Bank Governor Philip Lowe says high population growth means higher rents, house prices
Reserve Bank boss reveals simple math equation that proves Australia’s rent and house price crisis will only get WORSE
- Reserve Bank governor critical of population growth
- Philip Lowe linked it to higher rents, house prices
Australia’s most powerful banker has warned that crippling rent and house price increases will only get worse as the country’s population rises on record immigration.
Reserve Bank of Australia Governor Philip Lowe suggested new housing construction was not keeping pace with demand.
This financial year will attract a record 400,000 new migrants to Australia, with the rate of population growth from immigration – 1.7 per cent – among the highest in the developed world in a country with a low birth rate.
The population will grow by 2 percent this year. Are there two percent more homes? No,” Dr. Lowe told the Senate economics committee on Wednesday.
‘The rate of addition to the housing stock is very slow.
‘A lot of people are coming into the country, people who want to live alone, that doesn’t work.
“The way this unfortunately resolves itself is through higher house prices and higher rents.”
Dr. Lowe’s warning came when inflation rose to 6.8 percent in April — up from 6.3 percent — despite the Reserve Bank raising interest rates 11 times a year.
Economist Warren Hogan said the shock update could push interest rates back up next Tuesday.
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Reserve Bank of Australia Governor Philip Lowe suggested that the housing supply crisis was likely to get worse as construction failed to keep pace with demand
An ANZ-CoreLogic report released this week showed tenants across Australia spent 30.8 per cent of their income on rent payments, the highest level since June 2014.
This coincides with a slump in building approvals, with April’s drop of 8.1 percent marking the lowest level since 2012, the Australian Bureau of Statistics revealed on Tuesday.
Dr. Lowe suggested that more younger Australians should continue to live at home with their parents.
“As rents rise, people decide not to move out,” he said.
An ANZ-CoreLogic report released this week showed tenants across Australia spent 30.8 per cent of their income paying for a lease, the highest level since June 2014 (pictured is a queue for tenancy inspections in Sydney)
The national rental vacancy rate of 1.1 percent is at an all-time low, after more people chose to live alone during the pandemic, but immigration surged as Australia reopened to skilled migrants and international students.
Rents in the capital have risen 20.7 percent over the past year to $662 a week, data from SQM Research showed.
‘The underlying problem here is supply and demand in the rental market,’ said Dr Lowe.
‘The vacancy rate in many cities is very low, the rental vacancy rate is the lowest ever.
“During the pandemic, the average number of people in each household fell.
‘People wanted more space, they worked from home.’
Migrants who are tired of expensive rent and have higher salaries are more likely to buy their own house to live in.
Sydney’s median house price rose 1.3 percent in April to an even more prohibitive $1.254 million, data from CoreLogic showed, despite the Reserve Bank raising interest rates 11 times over the past year.
House prices also rose in Melbourne, Brisbane, Adelaide, Perth and Hobart.
While tighter monetary policy has driven property values down over the past year, prices have historically rebounded once interest rate hikes have stopped.
The Treasury Budget papers predict a record 400,000 migrants in 2022-2023, on a net basis, followed by another 315,000 in 2023-24.
They also predicted that 1.5 million people would move to Australia over five years, from 2022-23 to 2026-27, increasing the population from 26.5 million to 28.17 million.