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Inflation data confirms Australia’s two-speed rental market

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Rent prices in the largest capitals, Sydney and Melbourne, are declining, but not in hubs in other Australian capitals and regions.

ABS inflation data for the December 2021 quarter show that rents continue to fall in Sydney and Melbourne.Sydney rents fell 4.2% Since early 2020, Melbourne’s rents have fallen 2.5%.

But elsewhere, rents have risen sharply by 2.5-7.2% since the pandemic began.

This is in sharp contrast to Melbourne and Sydney, where rental demand has declined since the COVID-19 crisis for many reasons.

Suspension of immigrants has hit these markets the most, and many modern immigrants, especially students, traditionally call these densely populated areas their hometowns.

Remote work arrangements, combined with a shift in taste to space and lifestyle, have played an important role in the cost of rent. For many, long-term blockades have also undermined the appeal of our more dense cities.

ABS inflation data measures changes in total rents, but advertising prices for new rents often provide a more timely signal of the situation.

The PropTrack rental report Let’s dig deeper into the situation in the rental market. The advertised rent data is in close agreement with the inflation data. Prices are falling in Sydney and Melbourne, but rising elsewhere.

But the most interesting thing is how strong rents are growing outside the capital. This is something ABS is not tracking.

With the exception of Queensland and the Northern Territory, it is clear that rural rents are significantly higher than in the capital.

Local areas have benefited for all reasons that Sydney and Melbourne are no longer favored by lessees. More people can work remotely and want more space and lifestyle changes.

As outlined in the PropTrack Rental Report, rents are expected to continue to grow strongly in 2022 as rural rental conditions remain harsh. This will put more pressure on local lessees in the coming months.

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