Unit demand lifts rents, but affordability and lower migration curb annual growth
Australia’s rental market saw a modest rise in the March quarter, with national rents increasing by 1.7%, according to Cotality’s latest Quarterly Rental Review. The uptick follows a 0.4% rise in the previous quarter but remains the weakest first-quarter increase since 2019.
Although the quarterly rise suggests seasonal activity, Cotality – formerly known as CoreLogic – noted that growth continues to moderate over the longer term.
“Rental growth is still tracking above the pre-COVID-19 decade annual average of 2.0%, but the rate of change has slowed considerably,” said Cotality economist Kaytlin Ezzy (pictured above). “At 3.8%, the 12-month change is now less than half the recent 8.3% peak recorded over the year to March 2024.”
Ezzy said pressures such as declining affordability and slower population growth have reduced rental demand. “The further increase in the average household size due to worsening affordability, along with the slowing in population growth, continues to put downward pressure on rental demand and, subsequently, on rental value growth,” she said.
Advertised rental listings remain scarce. Just under 99,000 properties were available for rent nationally over the four weeks ending April 6 – 22.1% below the typical level for this time of year. As a result, national vacancy rates edged down to 1.6% in March, from 2% in December, sitting just slightly above the record low observed in March 2024.
Much of the quarterly increase was driven by the unit sector, which recorded a 2.3% rise in median rents, compared to 1.4% growth for houses. This reverses the previous trend where house rents had generally outperformed units. “The renewed growth in unit rents is likely linked to the seasonal lift in demand from international students who typically favour higher density housing,” Ezzy said.
Over the past year, the difference between house and unit rents has grown. The median rental gap widened to $47 in March, up from $38 in June 2023.
“While still below the $71 gap recorded at the end of 2021, the expanding of the house rent premium has eroded some of the relative affordability advantage that some renters have gained by forming larger share houses,” Ezzy said.
Meanwhile, Hobart recorded the highest increase in capital city rents over the quarter at 2.3%, followed by Perth (2.2%), Brisbane (1.9%) and Adelaide (1.8%). Sydney and Melbourne, which had both seen declines in the December quarter, returned to growth with rents rising 1.4% and 0.8%, respectively. Darwin posted the smallest change, with a 0.3% increase.
On an annual basis, Perth remained the strongest performer with a 6.3% rise, followed by Adelaide (5.5%) and Hobart (4.6%). Canberra showed the slowest growth, at just 1.6% year-on-year — equating to a $10 weekly increase.
Despite its recent rise, Hobart is still the least expensive rental capital, with a median weekly rent of $574. Sydney continues to be the most costly at $781.
Cotality expects the current trend of easing rental growth to continue, influenced by weaker demand fundamentals. Since March 2020, national rents have surged by 38.4% — an average of $182 more per week or $9,442 annually. This has pushed many tenants to change their living arrangements, particularly in major cities.
“With affordability stretched, many renters are adjusting by staying in shared accommodation or delaying independent living, which in turn reduces net rental demand,” Ezzy said.
Recent immigration figures also suggest a softer outlook. Net overseas migration in the year to September 2024 totalled just under 380,000 — over 30% lower than the previous year’s high.
“Given the easing in demand, it’s likely rental growth will remain relatively subdued over the coming quarters, even in the face of tight supply,” Ezzy said.
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