National rental market has “well and truly passed the peak of the recent rental boom “
Key takeaways
The pace of national rental growth continued to slow in 2024, with rents up 4.8% over the year after surging 8.1% in 2023
Renters at the median household income were spending approximately 33.0% of annual pre-tax wages to service the median rent, the highest portion since CoreLogic started tracking rental affordability in 2006.
The combined regions delivered stronger rental growth over the quarter, up 1.2% compared to a milder 0.1% increase across the capitals.
Growth in house rents outpaced unit rent growth at both the quarterly (0.6% and -0.2%) and annual levels (5.0% and 4.2%).
The majority of capitals recorded a slowdown in annual rental appreciation led by Sydney and Melbourne.
National rent values rose 0.4% in the December quarter, the smallest Q4 change in rents since 2018.
The pace of national rental growth continued to slow in 2024, with rents up 4.8% over the year after surging 8.1% in 2023, according to CoreLogic’s latest Quarterly Rental Review.
The result marked the smallest annual rental increase since the 12 months to March 2021 when rents rose 3.6%.
This suggests that while still high relative to the pre-covid decade average (2.0%), the national rental market has well and truly passed the peak of the recent rental boom.
This notion was further supported by the 0.4% rise in rents in the December quarter, which was the smallest Q4 change in rents since 2018 (0.2%).
Affordability as a key driver
Rental affordability continues to be a significant drag on rental growth.
Since the onset of COVID, rents have increased by 36.1% nationally, equivalent to a rise of $171 per week, or $ 8,884 per year at the median level.
As of September 2024, assuming a median household income, renters were spending approximately 33.0% of annual pre-tax income to service the median rent, the highest portion since CoreLogic started tracking rental affordability in 2006.
The net result has potentially seen some prospective renters delay their decision to leave the family home, while others have looked to form larger share households as a way of distributing the additional rental burden, unwinding the previous shrinking in the average household size that was apparent through the early stages of COVID.
The move to larger households was also apparent across property types, with houses recording both stronger quarterly (0.6%) and annual rent rises (5.0%) compared to the unit sector (-0.2% and 4.2%, respectively).
Changes in supply and demand as important factors contributing to easing rental growth
On the demand side, the easing in net overseas migration was also a factor contributing to softer rental demand, with net overseas migration levels expected to normalise around pre-Covid decade averages by the 26/27 financial year.
While on the supply side, the annual value of new investor lending increased by 26.3% over the year to September 2024, increase in investor participation above levels, suggesting a potential net increase in rental stock.
Together these factors have supported an easing in vacancy rates over the year, from a low of 1.4% in November 2023 to 1.9% at the end of 2024.
A look across Australia
Looking across the country, the combined regions continued to deliver stronger rental growth compared to the capitals, up 1.2% over the quarter and 6.2% over the year.
By comparison, the combined capitals recorded a milder 0.1% quarterly increase and a 4.3% rise over the 12 months to December.
Across the capitals, the majority of cities recorded a slowdown in rental growth over the year, led by Sydney and Melbourne, where the rolling annual trend eased from 9.9% and 11.0% over 2023 to just 3.0% and 4.1% respectively in 2024.
The only capital cities to see increased momentum in rental growth were Hobart (6.0%), and Canberra (2.6%), off the back of falling rent values in 2023.
Despite the subtle quarterly decline in rents, Sydney maintained its position as the country’s most expensive rental capital, with a median weekly rental value of $773.
Stronger rent rises saw Perth take out the second spot at $695 per week, overtaking Canberra at $667 per week.
Hobart maintained its title as the county’s most affordable rental capital and was the only capital to record a median weekly rental value under the $600 mark, at $554 per week.
Melbourne came in second with the typical dwelling renting for $604 per week, followed by Adelaide at $611 per week.
Yields vary across each capital city
With dwelling values up 4.9% and rental values up 4.8% over 2024, national gross rental yields held steady at 3.7% over the year.
While flat at the national level, yields are around 50 basis points above the recent low recorded in January 2022 (3.2%) but remain around 50 basis points below the pre-COVID decade average (4.2%).
Despite stable headline results, changes across the individual capital city gross rental yields were more varied and resulted in a changing of the guard.
Declining values (-3.0%), along with moderate rental growth (4.1%), saw Melbourne’s gross rental yield rise 29 basis points over the year to 3.71%, while double-digit value growth in Brisbane (11.2%) and Adelaide (13.1%) saw rental yields decline -31 basis points and -21 basis points over the year, to 3.63% and 3.66% respectively.
Across the remaining capitals, Perth saw yields fall 30 basis points over the year, from 4.5% to 4.2%. Sydney yields held steady at 3.0%, while Hobart (+30 basis points), Darwin (+21 basis points) and Canberra (+12 basis points) all recorded an increase in yields to 4.4%, 6.7% and 4.1% respectively.
