Australia’s rental market is showing signs of stabilisation as 2024 draws to a close, providing landlords with a moment to recalibrate strategies amidst a shifting property landscape. The latest CoreLogic Housing Value Index reveals that national rents increased by 5.3% over the past year, a significant slowdown from the double-digit growth rates seen during the pandemic. While rents remain above pre-pandemic averages, the pace of growth has decelerated markedly.
Perth continues to lead the nation with the highest rental growth for both houses and units, at 8.7% and 9.7% respectively. Despite this, the trajectory of rental increases across Australia reflects broader economic conditions and a return to more balanced supply and demand. With the rental market cooling, landlords face a critical juncture to optimise their portfolios for the long term.
The slowdown in rental growth is linked to multiple factors, including easing population growth and a gradual return to pre-pandemic household sizes. During COVID-19, smaller households drove significant demand for rental properties. Now, record-low rental affordability appears to be encouraging renters to consolidate, either by sharing accommodation or returning to family homes. These trends are moderating the upward pressure on rents, providing tenants with some respite and signaling a more sustainable path forward.
CoreLogic data indicates that gross rental yields have remained stable, holding in the high 3.6% range nationally. This suggests a relatively favourable environment for landlords, particularly in regions like Perth and Darwin, where yields are significantly higher at 4.2% and 6.8%, respectively.
Across major cities, vacancy rates are still low. However, with advertised stock levels increasing, landlords in some regions may need to review any expectations for rental price increases.
Looking to 2025, the rental market’s trajectory will likely depend on broader economic shifts. Interest rate cuts anticipated mid-year could relieve financial pressures on investors while encouraging further activity in the property sector. However, landlords should remain mindful of affordability constraints facing tenants, as these will influence the ability to maintain consistent occupancy.
Despite challenges, structural undersupply in the housing market offers long-term support for rental income potential. With construction activity lagging due to high labour and materials costs, the demand for well-located rental properties is unlikely to wane significantly. Additionally, policy interventions aimed at addressing housing supply shortages could emerge, potentially influencing the rental market landscape.
To navigate these evolving conditions, landlords should adopt proactive strategies such as offering competitive lease terms, investing in property upgrades to attract quality tenants, and ensuring compliance with any new regulations introduced in the coming year. By balancing tenant affordability with market-driven rental adjustments, landlords can position themselves to sustain stable returns while fostering long-term relationships with tenants.
As 2025 approaches, Australia’s rental market appears poised for a steadier phase, providing landlords with opportunities to secure resilience and growth amid a changing economic and housing environment.
