Annual inflation rate has dropped to 6.0 per cent in the June 2023 quarter, compared with the previous quarter’s 7.0 per cent rate. However, the rental market has passed another grim milestone and shows no signs of easing said Master Builders Australia CEO Denita Wawn.
“While still well above the national inflation target, the sizeable slowdown in inflation should allow the Reserve Bank to pause for a time on interest rates.”
“We are now at the stage where further interest rate increases will probably do more harm than good to our industry and the broader economy.
“Encouragingly, the cost of newly built homes is continuing to moderate. Over the year to June 2023 quarter, new home prices rose by 7.8 per cent. This has been helped by the slowdown in the cost of key home building materials like timber and some metals.
“Sadly, there is a continued escalation in rental costs which have just seen their sharpest quarterly jump since 1988.
“Rents are continuing to accelerate because landlords’ mortgage interest costs have risen so substantially over the past 14 months, and we simply aren’t building enough new higher-density homes to meet rental demand.
“The annual volume of new apartment and unit starts dropped below 100,000 back in 2019 and has come nowhere near this threshold ever since.
“Supply of higher-density homes needs to be resuscitated urgently. Doing so will require action to reduce the costs of creating new homes, bolstering investor demand, and making the risks to builders and developers a little less confronting.
“Even though the overall inflation rate has improved, services inflation has worsened. Services are labour intensive and the shortage of workers in our economy is one of the main sources of price pressures here.
“Australia’s ability to attract the workers we need right now is being hampered by the worsening rental costs evidenced in today’s figures and the unfavourable situation with housing affordability.
“Governments must step up in encouraging more investment in the industry and removing unnecessary supply pressures such as development application delays and planning constraints.
“Delivering improvements to our industry’s cost and productivity performance is key and can unlock many of our most pressing economic issues,” Ms Wawn said.