Soft house prices mean higher rents and higher inflation

In his great Blog Christopher Joye made some succinct but profound comments about some possible consequences of what’s happening in our property markets.

He said Soft house prices = no housing investment = higher rents = higher inflation

And mentioned how NAB explains in this flash note, while weak house prices might seem like good news for the RBA, they are only likely to exacerbate the upward pressure on rents:

“The housing figures confirm the recent poor monthly outcomes that have been reported in the RP Data-Rismark series, and are further evidence of the deceleration in house prices since the middle of last year, when the RBA raised interest rates to more normal levels after the super-low rates seen in 2009. It’s also a key factor in the minds of households and the high level of ‘consumer caution’ they are showing at present.

The lack of prices growth means that investment in housing will remain soft. That means less supply and therefore higher rents due to solid population growth.”

Source: Christopher Joye’s blog 


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