The rise in working from home has contributed to the rise in demand for rental properties, the Reserve Bank’s chief economist has said.
Australia’s population of just 27 million lives in approximately 11 million households, with an average number of people per household of approximately 2.5.
But speaking on Thursday, RBA chief economist and assistant governor Sarah Hunter said the shift to working from home, which was accelerated during the pandemic, had also helped drive this shift as Australians look for extra rooms. , not to house a person, but a computer. .
Dr Hunter (pictured) also warned there was no “quick fix” to Australia’s housing crisis.
“While some people have returned to the workplace full-time, there has been an increase in the proportion of people working from home – for many, a home office space is now highly desirable,” Dr Hunter said at a business conference in Hobart on Thursday.
“This suggests that recent declines in the average number of people per household will be at least partially permanent.”
If the decline in housing stock over the past 40 years is reversed, Dr Hunter said Australia’s housing shortage could be significantly reduced.
“If for some reason the average household size were to increase again to 2.8, we would need 1.2 million fewer homes to house our current population, no small difference,” he added.
Rental prices have skyrocketed in capital markets, affecting tenants’ family budgets.
Homeowners do not benefit from rate increases
Later in her speech, Dr Hunter said there was “little or no evidence” that landlords have passed on the costs of rising mortgage payments to their tenants.
As borrowers have been hit by 13 interest rate increases in the past two years, homeowners, as well as owner-occupiers, have seen their payments increase, raising concerns that these higher costs have been assumed by the tenants.
But the RBA’s chief economist said preliminary analysis by the central bank showed higher interest rates were not the main driver of rising rental prices in the short term.
“The observation that market rents and interest rates move together appears to be a case of correlation, rather than a rise in interest rates causing rents to rise,” Dr Hunter added.
“There is little to no evidence that rising interest costs will pass directly to rents in the near term.”
Rather, rental market conditions, captured through the vacancy rate, were primarily to blame for the recent rise in prices.
According to the most recent measurements, rental affordability has fallen to its lowest level in 17 years, and rent growth has grown faster than many other goods and services across the economy.
Dr Hunter also warned there is no “quick fix” to Australia’s housing crisis.
“Demand pressure, and therefore upward pressure on rents and prices, will remain until new supply arrives,” Dr Hunter said.
“We expect this response to take some time to materialise, given the current level of approval for new housing and information from the link that many projects are not yet viable.”
Historically, a rise in home prices and rents has triggered a wave of new construction as developers seek to capitalize on increased profitability.
However, with a “perfect storm” facing the sector, Dr Hunter said capacity constraints in the sector continued to hamper activity.
“Companies in our link program are reporting that finishing operations are currently thin, as the large number of projects started during the pandemic move towards completion,” he said.
The senior RBA official’s comments come amid an ongoing political fight over the rising cost and anemic supply of rental properties.
While Labor has supported measures that will boost the supply of social and affordable housing to alleviate runaway rental prices, the Greens have backed less conventional methods, including freezing rents and establishing a public property developer.