Australia has passed the peak of its rental boom with its smallest Q4 change in rent since 2018, according to CoreLogic.
Rent values rose only 0.4% in the December 2024 quarter. Australia also experienced its lowest annual rental growth in 2024 (4.8%) since 2021, when rents rose 3.6%.
This is low compared to 2023’s 8.3% growth.
CoreLogic economist, Kaytlin Ezzy said the main driver of the slowing growth is affordability. According to Ezzy, rents have increased by 36.1% nationally since the onset of COVID, the equivalent of A$171 per week or $8,884 per year at a median level.
As of September 2024, renters were spending around 33% of annual pre-tax to pay for median rent, which is the highest since CoreLogic started tracking 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," Ezzy said.
Ezzy also pointed to a change in supply in demand for the easing rental market, as COVID meant there was less overseas migration. She said the levels of net overseas migration are set to normalise to 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,” she said.
"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."
The only capital cities that saw increased momentum in the rental market are Hobart (6%) and Canberra (2.6%), off the back of falling rent values in 2023.
Despite a slowdown in rental growth, Sydney still maintains its status as the country’s most expensive rental capital with a median weekly rent of $773.