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Low CPI good for property buyers, helping renters but hurting landlords

28 July 2017 Sasha Karen
Property

CPI figures for the June quarter this year show the trend of low interest rates continuing into the future. This outlook, according to the Real Estate Institute of Australia (REIA), means good times for property buyers and renters, but not for landlords.

“The All Groups CPI increased by 0.2 per cent in the June quarter, giving an annual increase of 1.9 per cent," REIA president Malcolm Gunning said. "This is marginally lower than the annual increase to the March quarter of 2.1 per cent.” 

He added: “The annual change for both the analytical series of trimmed mean and for the weighted median was 1.8 per cent, with the annual change in the trimmed mean being the same for the past four quarters and the weighted mean up by 0.1 percentage points compared to the year to the March 2017."

According to Mr Gunning, the numbers are below the Reserve Bank of Australia's target zone of 2 per cent to 3 per cent, which suggests the continuation of historically low interest rates for some time.

Meanwhile, the Housing Group increased by 0.3 per cent for the quarter and by 2.4 per cent over the last year to June 2017. Rents rose minutely by only 0.2 per cent for the quarter and 0.6 per cent for the last year, providing relief for renters, but giving landlords a minimal rise in profits.

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The reason behind the rise in the Housing Group were new residential property purchases as well as gas and other household fuels.

“From 2013, when investment in housing started to pick up, we have seen the rate of increase in rents slow down in Australia," Mr Gunning said. "For the last three quarters, the annual changes have been 0.6 per cent – the lowest annual increase since December 1994."

He added: “The latest CPI figures show that the increased investment in housing through the current taxation arrangements has kept growth in rents lower than they have been historically. In Sydney and Melbourne where much of the investor activity has been focused, the increase in rents in the past twelve months has been 2.5 per cent and 1.7 per cent, respectively.”

Mr Gunning added that the latest inflation data indicates that interest rates are likely to hold for the near future, as CPI figures play a major role in the RBA’s decision to alter the cash rate.

Low CPI good for property buyers, helping renters but hurting landlords
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