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Rent inflation declining, yields back to average: RBA

By Elyse Perrau
12 August 2014 | 10 minute read

The Reserve Bank of Australia (RBA) recently noted that conditions in the rental market appear to have eased.

According to a Reserve Bank statement on monetary policy, “the nationwide rental vacancy rate has been little changed over recent quarters at a relatively low level, but conditions in the rental market appear to have generally eased”.

"Rent inflation has declined to its slowest pace since the mid 2000s," it said.

"Combined with strong growth of housing prices over the past year or so, rental yields have fallen to around their average of the past decade.”

The RBA painted a positive picture of the housing market but took a slightly gloomier view of the national economy.

GDP growth is forecast to be a little below trend this financial year before returning to trend pace in 2015/2016.

That is due to government Budget cuts, the high Australian dollar and a decline in mining investment.

“These factors will be partly offset by the stimulus from low interest rates, which is supporting activity and prices in the housing market and also bolstering household consumption,” the report said.

The Reserve Bank said low interest rates, strong population growth and a retargeting of government grants had helped generate a “strong recovery” in housing investment.

Dwelling investment is expected to “increase noticeably” as a share of GDP.

“Forward-looking indicators of dwelling investment, such as approvals, commencements and work yet to be done remain at high levels and will support growth of dwelling investment in coming quarters,” it said.

“Dwelling construction is expected to continue to expand later in the forecast period in response to low interest rates, strong population growth and only limited construction over the past decade.”

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