National rent prices grow at slowest rate in four years

Daniel Bowden wouldn’t say he is struggling, but he is not far off.

The 45-year-old father rents a two-bedroom, semi-detached house in Caulfield South in Melbourne’s inner south-east with his partner and 10-year-old daughter.

He has been there about a year, and since moving in the rent has jumped 4.6 per cent.

It is an experience echoed across the country last year — rent prices grew 4.8 per cent nationally in 2024, according to CoreLogic data.

While the price rise still stung for renters like Mr Bowden, it was the slowest rate of increase since 2021, signalling a slow return to pre-pandemic growth when prices rose about 2 per cent a year, on average.

CoreLogic has declared that the rental market is “well and truly passed the peak of the recent rental boom”, with a lack of affordability leaving some renters unable to pay any more.

After his most recent rent hike, Mr Bowden is close to spending more than 30 per cent of his income on rent.

According to CoreLogic’s data, as of September 2024, renters with a median household income were spending about 33 per cent of their annual pre-tax income to service the median rent — the highest portion since the research firm started tracking rental affordability in 2006.

“It was actually more manageable when I was just having to pay down a mortgage on a unit,” Mr Bowden, a former home owner, said.

Sydney, Melbourne lead rent deceleration

In contrast to 2024, rent prices surged 9.5 per cent in 2022, and another 8.1 per cent in 2023.

CoreLogic economist Kaytlin Ezzy said the slowdown in 2024 was due to a couple of key factors.

“It was primarily driven by an easing in overseas migration and an uptick in the average household size, and increased investor participation over the year adding to rental stock,” she said.

The slowdown in rent rises will also contribute to lowering inflation, as housing costs make up a major portion of the consumer price index — a key inflation measure the Reserve Bank relies on to make decisions about rates.

Sydney and Melbourne recorded the largest deceleration in price growth, rising 3 and 4.1 per cent respectively, while Perth recorded the largest jump at 8.1 per cent.

“Perth in general was one of the stand-out performers for 2024 for rents and property values,” Ms Ezzy said.

“It saw a real boom in interstate immigration … there were a lot of people moving to Perth at a time when there wasn’t a lot of stock on the market.

“Sydney and Melbourne tend to be where the most overseas migrants land when they come to the country, so with overseas migration easing that would have driven a deceleration in those markets.”

Senior economist from REA Group Paul Ryan said data from his company showed rent prices in Sydney and Melbourne had stalled for the last six months.

“But there’s ongoing rent pressures in those hot property markets like Brisbane, Adelaide and Perth, just not as much as 2023, there’s been a huge drop since then,” he said.

Mr Ryan said the drop was due to growth in housing supply, especially in Melbourne which had experienced strong construction in 2024, and rent increases reaching capacity.

Regional Australia experienced bigger price hikes than capital cities, up 6.2 per cent last year according to CoreLogic’s report, compared to 4.3 per cent in cities.

It took the median rent across the regions to $561 a week.

Rental profitability drops in Brisbane, Adelaide

Gross rental yields in Brisbane and Adelaide dropped below Melbourne for the first time since 2008, when CoreLogic started its rental reports.

“Usually you have weaker yields in Melbourne and Sydney because house prices there are historically so high, but given strong growth in Brisbane and Adelaide, that’s changed now,” Ms Ezzy said.

Rental yields fell by roughly 0.3 percentage points in Perth to 4.2 per cent, Brisbane (3.6 per cent), and Adelaide (3.7 per cent).

Sydney’s yield held steady at 3 per cent, and profitability rose in Hobart (4.4 per cent), Melbourne (3.7 per cent), Darwin (6.7 per cent) and Canberra (4.1 per cent). Rental yields in regional Australia remained flat at 4.4 per cent.

Ms Ezzy said the change was likely due to strong interstate migration.

“We’re also seeing strong overseas migration driving rental demand in Brisbane as well.

“It’s higher than pre-COVID levels but lower than at the peak of annual overseas migration trend when we had 555,000 net arrivals in the year to September 2022.”

Hobart remains the country’s most affordable capital city for renting with the average dwelling costing $554 a week.

Houses vs units

The cost of renting a house outpaced units last year, with slower overseas migration and a shift towards bigger households driving demand for low-density housing.

House rents grew by 5 per cent in 2024, while units jumped 4.2 per cent.

But in capital cities, unit prices dropped 0.4 per cent, in comparison to a 0.4 increase in house rents. It pushed the median weekly rent for houses to $701, and units to $620 per week.

Adelaide saw the biggest jump in unit rents over the quarter, rising by 2 per cent, Hobart followed with increases in both units (1.6 per cent) and houses (1.4 per cent).

Higher rents than anticipated

A report released in November by flatmates.com.au, owned by REA Group, found 35 per cent of tenants surveyed had experienced rent increases in the last six months, and half of those were hikes exceeding expectations.

The group surveyed 8,700 landlords and tenants and found 57 per cent of renters were struggling to meet their rent payments, and the number of people aged over 55 entering a share house arrangement had grown 7 per cent compared to 2023.

“Half of respondents over 55 did so through financial necessity, however, there was also a 30 per cent rise in respondents opting for shared living for the companionship that it offers,” said product manager Claudia Conley.

Landlords had also started embracing share-housing, the report found, with 36 per cent listing their properties as share houses last year, and 36 per cent of respondents with spare rooms listing them to relieve cost-of-living pressures.

The year ahead

Rent price growth may have halved compared to 2022, but historically it is still high at almost 5 per cent, Ms Ezzy said.

Before the pandemic, rent prices increased about 2 per cent a year.

“We do expect that annual pace of growth to continue to pull back,” Ms Ezzy said.

“We’re seeing some capitals get pretty close; 3 per cent in Sydney and 3.2 per cent in Brisbane. So we would expect it will come back to those pre-COVID levels, even, potentially see a decline in rent values as more people are priced out.”

Mr Paul from REA Group agreed prices would continue to stabilise.

“National availability will continue to tick up in 2025 and rents will rise but at a slower rate than 2024,” he said.

“There’s still concern for markets where rents are growing faster than incomes like in Perth and Adelaide, and Brisbane to a lesser extent where budgets are being really squeezed.”