Rental market slowdown signals end of boom, report finds
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The Australian rental market is showing signs of cooling after a prolonged period of strong growth, according to new data from CoreLogic.
CoreLogic’s national rental index has remained flat over the past two months, marking the weakest rental market conditions since the early stages of the pandemic.
Research Director Tim Lawless said the slowdown comes after a 39% surge in rents between August 2020 and June 2024.
“The annual pace of rental growth peaked at 9.7% over the 12 months ending November 2021, which was a series high. The annual growth trend has since eased back to 7.2%, the lowest annual growth rate since the 12 months ending May 2021,” Mr Lawless said.
Despite the slowdown, most cities are still recording annual rental growth well above pre-COVID averages.
The unit sector has seen the most significant deceleration, with annual growth dropping from 14% in April 2023 to 6.7% in the most recent 12-month period.
Perth and Adelaide continue to show the strongest rental growth at 11.6% and 8.4% respectively, though both cities are experiencing a clear slowdown.
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Sydney recorded its first decline in rents over a three-month period since October 2020, with Hobart and Canberra also seeing decreases.
Mr Lawless attributed the slowdown to several factors, including affordability constraints and changing patterns of household formation.
“According to CoreLogic’s latest rental affordability metrics, a household on the median income would be dedicating 32.2% of their gross annual income to pay the median rent, a record high on the series that goes back 20 years,” he said.
The report also noted a decline in net overseas migration from its peak in early 2023, which has impacted rental demand.
Other contributing factors include the completion of new dwellings related to the HomeBuilder program and increased investor activity supporting rental supply.
Mr Lawless suggested the rental market may be approaching a more balanced state after years of rapid growth.