It is indeed strange times that we find ourselves in.
The KFC Zinger burger no longer has lettuce on it; it’s been replaced by cabbage! because an iceberg lettuce costs as much as $9 right now.
There are supply challenges around the world – caused by a pandemic, war and floods happening at the same time. The result being our cost of living has gone up.
You’re lucky to get change from a $5 note when buying a coffee (that is, if you even use cash anymore).
Things will get back to normal eventually, they always do.
In the meantime, the change and uncertainty can be a little unnerving.
(My free Budget Tool can help you balance the budget if you’re wanting some help).
Aside from lettuce, I see a bigger supply challenge right now that gets almost no airtime in the media. It also happens to create an opportunity for those brave enough.
In the past 10 years, Australia’s population grew by 4.5 million people.
The average house contains 2.6 people, so we should have built 1.73 million new homes to house that population increase. We built about 1.6 million, leaving us 130,000 short.
It’s also worth noting that 45 per cent of the homes we did build were units, even though people are wanting houses in suburbia in this post-pandemic landscape.
That’s why the vacancy rate is 1 per cent today, and national rents are up by 9 per cent for the year. There are just not enough properties to go around.
For perspective, that 9 per cent increase means the average Aussie is paying $60 per week more on rent today than they were this time last year.
That’s the equivalent of 7 iceberg lettuces or 12 flat whites per week!
Australia is gradually reopening its international borders. We have no choice but to do that because there are 400,000 job vacancies right now. That’s the most we have ever had, and nearly double the number before the pandemic.
At the same time there are 500,000 fewer temporary migrants and half as many international students in Australia now, compared with 2019. That’s 500,000 less workers than we had at the start of the pandemic.
While opening up international borders will fix the job problem in Australia today, it won’t fix the housing supply problem. In fact, it’s going to have the effect of throwing gasoline on a fire.
When the cost of living goes up, we adjust. We eliminate or cut back on discretionary spending to ensure we have enough money for our essential needs.
The most essential need we have is a roof over our head.
It’s probably the fastest growing cost of living today. Not because of a pandemic, war or natural disaster, but because we haven’t built enough homes for a decade or longer.
I don’t see that changing any time soon. In fact, it will only get worse when the tidal wave of international migrants are brought into the country to fill the jobs we currently can’t.
It’s not an easy problem to fix. However, it does present an opportunity for those brave enough to seize the opportunity.
I can’t see a version of the future where rents don’t continue increasing faster than inflation and interest rates.