Interest rates Australia: Further rate cuts by Reserve Bank at risk as rent pushes up inflation
The latest data from Cotality shows there are concerns for housing inflation and its knock-on effects off the back of rental re-acceleration picking up in state capitals for the first time in two years.
The capital city rental value index has increased by three per cent to July 2025, up from 2.7 per cent a month before, according to Cotality's August monthly housing chart pack.
That has marked the end of 16-straight months of moderating or stable rental growth.
It was a trend worth keeping an eye on, Cotality economist Kaytlin Ezzy said.
'The re-acceleration that we've seen in rent value growth and construction costs more recently are an indication that maybe the housing component of inflation has sort of hit its floor in terms of the pace of growth,' she told AAP.
'And that we would see that component of the CPI basket shift higher moving forward.
'If it does continue to trend higher, it could put future rate cuts at jeopardy.'
The consumer price index (CPI) basket is goods and services used to track changes in cost of living.
The housing component made up more than one-fifth of the basket and rents accounted for 6.6 per cent, Ms Ezzy said.
Another concern for housing inflation is an uptick in construction costs shifting to 2.9 per cent to June 2025, from 2.6 per cent in the 12 months to June 2024.
Labour was a major factor in driving increased construction costs, Ms Ezzy said.
'We recently put out our CCCI Index report, which covers off the increase in construction costs over the June quarter ... it does suggest that we are seeing a little bit more pressure in construction costs, particularly residential projects competing for that labour with infrastructure projects,' she said.
Sydney and Brisbane have led the re-acceleration in capital city rental growth with their unit markets driving the uptick.
Annual changes in dwelling rents in the NSW capital have gone from a recent low of 1.8 per cent to 2.4 per cent in the 12 months to July.
Brisbane's annual rental trend has risen by 1.4 percentage points following lows in February of 3.2 per cent to 4.6 per cent.
Melbourne's healthy flow of new housing stock to the market had kept the trend in rent growth a little bit lower in recent years, Ms Ezzy said.
The Reserve Bank cut interest rates for a third time in six months on Tuesday.
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The Advertiser
17 hours ago
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19 hours ago
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Reason Aussies are $3k worse off
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Sydney Morning Herald
19 hours ago
- Sydney Morning Herald
The end of negative gearing as we know it? Spender calls for new income tax system
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