CANBERRA—Rents could jump a further 10 per cent this year because of the worsening housing shortfall, the nation's biggest bank has warned.
New government data released today showed growth in building approvals unexpectedly fell for a second straight month in June and now stood nearly eight per cent lower than a year earlier.
Commonwealth Bank of Australia (CBA) estimates say annual approvals are around 160,000 units, well below the 185,000 needed to meet demand from population growth, 457 visa workers, students and working visa groups.
"The insufficient level of residential construction will intensify the shortfall in rental accommodation that is driving rents up strongly," CBA Senior Economist Michael Workman said.
He said rents were likely to rise by 10 per cent over this year, adding around 0.5 per cent to already heated inflation pressures.
A report last week showed rents grew by double digits in most of the country's major cities in the past 12 months, including a staggering 25 per cent jump in Perth.
The Federal Government last week officially launched its National Rental Affordability Scheme aimed at increasing the supply of affordable rental dwellings by 50,000, and possibly 100,000 by 2012.
But analysts expect it could be at least a year before struggling low-income families gain any benefit from the initiative.
Building approvals fell for a second straight month in June, declining by a seasonally adjusted 0.7 per cent to 12,237 units, according to the Australian Bureau of Statistics.
Economists had expected a 1.0 per cent rise in June after a revised 7.2 per cent decline in May.
The weaker-than-expected result was largely due to a further 1.4 per cent decline in "other dwellings" - such as flats and apartments - and which have now slumped 22 per cent in the past year.
Growth in house building was unchanged in June to be down 0.1 per cent in the year.
Notably, approvals in the country's largest housing market - NSW - tumbled 16.5 per cent in June.
"Housing will continue to face strong headwinds as the lagged effect of high interest rates and declining consumer confidence flow through," Master Builders Australia Chief Economist Peter Jones said.
"It will take falling interest rates next year to spark a release of pent-up demand, with the danger that skill shortages and other capacity constraints will stymie the upturn, forcing price hikes and delays."
The data was a further sign that the Reserve Bank of Australia's (RBA's) strategy to slow domestic demand through high interest rates to ease inflation pressures is working.
Economists widely expect the RBA board to leave its cash rate unchanged at a 12-year high when it meets next Tuesday, with some predicting a rate cut early next year.
Such predictions are likely to be underpinned tomorrow when monthly and quarter retail sales figures are released, along with the RBA's monthly credit report - all of which are expected to show soft readings.
