Renters have curbed their spending by almost one per cent in the past year as they save their money for ‘essential’ costs.
However, surging unit rents have finally slowed down across the capital cities, with hope further heat will come out of the rental market.
According to the monthly CommBank Household Spending Insights Index, renters’ spending dropped 0.9 per cent in the year to June, compared with spending increases for those with a mortgage (up 1.5 per cent) and outright owners (up 2.1 per cent).
Overall, the index rose 0.6 per cent in June to 150.5, driven primarily by increased spending on recreation (up 3.2 per cent) and hospitality (up 2.1 per cent).
The index showed renters have reduced their spending on recreation, household services, motor vehicles, transport, education, household goods, hospitality and utilities.
“While it was somewhat surprising to see household spending rise for the second month in a row, we have witnessed a significant disparity in spending behaviours across home ownership categories, as renters pull back on spending in the year to June while mortgage holders and outright owners have increased spending,” CBA Chief Economist Stephen Halmarick said.
“This suggests younger Australians, who are more likely to be renting, are tightening their wallets and likely spending more on essentials, given these are the fastest growing spending categories so far this year.”
A glimmer of hope for renters could be that unit rents have finally slowed down in the major capital cities.
According to CoreLogic, the growth rate in capital city unit rents has fallen from 15.1 per cent to 7.6 per cent over the past 12 months, with the biggest slowdowns in Sydney, Melbourne and Brisbane.
Annual rental growth for all dwellings also fell to 8.6 per cent from high of a 10.6 per cent in April.
CoreLogic Head of Research Australia, Eliza Owen, said the larger capital city markets had seen the sharpest fall in rents.
“Although rents have not actually declined year-on-year, there is a clear slowing in the pace of annual growth across the large inner city unit markets of Sydney, Melbourne and Brisbane,” Ms Owen said.
“This likely reflects an easing in demand, with apartment rental growth not sustaining a strong rate as last year and comes amid early signs of easing net overseas migration, which according to ABS data peaked in the March quarter of 2023.”
In Sydney, the annual rate of growth for unit rents fell 10 percentage points to 7.1 per cent.
Melbourne unit rents dropped 7.4 percentage points in the past year to 7.5 per cent, and annual growth in Brisbane unit rents slowed from 15.3 per cent this time last year to 8.5 per cent in the past 12 months.
Ms Owen said that despite the falls in Sydney and Melbourne unit markets, the growth rate remained well above the historic averages, which was respectively 2.7 per cent and 2.6 per cent throughout the 2010s.
“While Sydney and Melbourne still have a much higher growth rate than the historic annual average, the consistent slowdown in growth is an early sign of demand pressures slowing in the market,” she said.
“Clearly, rental demand is not strong enough to sustain ongoing, double-digit growth across these cities.
“In contrast, annual growth in house rents has increased slightly and regional rents have also re-accelerated.
“This suggests rental demand may also be pivoting away from capital city unit rentals towards capital city houses and the regional market.”
