Australia’s rental market slows as affordability bites

Annual rents record smallest increase since 2021

Australia’s rental market slows as affordability bites

National rents increased by 0.4% in the December 2024 quarter, marking the smallest fourth quarter rise since 2018, CoreLogic’s latest Quarterly Rental Review has revealed.

Over the year, rental growth slowed to 4.8%, down from 8.1% in 2023, reflecting the smallest annual increase since March 2021. 

CoreLogic economist Kaytlin Ezzy (pictured above) attributed the slowdown to affordability pressures. “Rental affordability continues to be a significant drag on rental growth,” she said.

Since the onset of the COVID-19 pandemic, rents have risen by 36.1% nationwide, translating to a median increase of $171 per week or $8,884 per year. As of September 2024, renters were spending 33.0% of their annual pre-tax income on the median rent — the highest proportion since CoreLogic began tracking affordability in 2006.

“Some prospective renters have delayed moving out of family homes, while others are forming larger share households to offset rising expenses,” Ezzy said, noting that rising costs were reshaping renter behaviours.

The CoreLogic report also showed that house rents outpaced unit rents over the quarter, increasing by 0.6% compared to a 0.2% decline in unit rents. On an annual basis, house rents rose by 5%, while units saw a smaller 4.2% increase.

Ezzy also pointed to shifts in supply and demand. Net overseas migration is easing and expected to normalise to pre-pandemic levels by the 2026-27 financial year, potentially reducing rental demand. On the supply side, increased investor activity could expand rental stock, with investor lending up 26.3% over the year to September 2024.

These trends have helped loosen tight rental conditions, with national vacancy rates rising from a low of 1.4% in November 2023 to 1.9% by the end of 2024. 

Rents in the regions grew more strongly than in capital cities. Combined regional markets recorded a 1.2% rise over the quarter and a 6.2% increase over the year. In contrast, the combined capitals posted a 0.1% quarterly rise and a 4.3% annual increase. 

Rental growth in major cities slowed in 2024, particularly in Sydney and Melbourne, where annual increases fell to 3.0% and 4.1%, down from 9.9% and 11.0% in 2023. Hobart and Canberra bucked the trend, with annual rents rising by 6.0% and 2.6%, following declines in 2023. 

Despite slowing growth, Sydney remained the most expensive rental market with a median weekly rent of $773. Perth overtook Canberra as the second-most expensive market at $695, while Hobart remained the most affordable capital with a median rent of $554.

Meanwhile, gross rental yields held steady at 3.7% nationally in 2024, remaining below the pre-COVID decade average of 4.2%. However, individual capital cities saw varied changes. Melbourne’s yields rose to 3.71% due to declining dwelling values, while Brisbane and Adelaide experienced declines to 3.63% and 3.66%, respectively, amid double-digit value growth. 

Sydney’s yields remained flat at 3%, while Perth saw yields fall to 4.2%. Hobart, Darwin, and Canberra all recorded increases, with Darwin leading at 6.7%. 

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