Rents in Melbourne and Sydney will keep falling in the near term according the Reserve Bank of Australia.
Landlords are set to keep feeling the pain as migration levels hit record lows thanks to COVID-19.
“Rental vacancy rates had risen recently, and members noted that downward pressure on rents was unlikely to dissipate in the near term in either Sydney or Melbourne,” the RBA’s most recent minutes said.
“Rental supply had been boosted by short-term and holiday rentals being brought onto the long-term rental market, while demand had been depressed by the reduced flow of new migrants and a decline in the rate of household formation.”
In Australia, population growth has fallen to near-zero, statistics not seen since World War I when there were migration restrictions in place.
Treasury has predicted an 85 per cent fall in net migration for 2020-21 compared to back in 2018-19.
Over the past 12 months in Melbourne, rents of houses have dropped by 1 per cent and rents of units and apartments have dropped by 6 per cent.
The RBA minutes also highlighted concerns about the lack of credit growth in the economy.
“Members noted that, in addition to weak demand for household and business borrowing, the supply of credit had also tightened somewhat since earlier in the year, reflecting the uncertain economic outlook,” they said.
Coming off the back of our story yesterday, the RBA also pointed out concerns about the rising Australian dollar.
“While members noted that the Australian dollar was broadly aligned with its fundamental determinants, a lower exchange rate would provide more assistance to the Australian economy in its recovery.”