Affordability, Population Drag Down Rental Growth

Despite an uptick last month, national rental growth has slowed as worsening affordability and slowing population growth continue to bite.

According to Cotality’s Quarterly Rental Review, national rents rose 1.7 per cent over the March quarter, up from 0.4 per cent in the December quarter.

However, the review said, the uptick was largely seasonal—the 1.7 per cent rise in rents over the three months to March was the slowest first quarter growth since 2019 (1 per cent) and is a percentage point below the 2.7 per cent lift seen this time last year.

While rental values experienced a seasonal boost, Cotality (formerly CoreLogic)  economist Kaytlin Ezzy said the underlying trend remained one of moderation.

“Rental growth is still tracking above the pre-Covid decade annual average of 2 per cent but the rate of change has slowed considerably,” Ezzy said.

“At 3.8 per cent, the 12-month change is now less than half the recent 8.3 per cent peak recorded over the year to March 2024.

“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.”

Although the seasonal rise offered some short-term momentum, Ezzy said the broader trend of moderation was likely to persist amid weakening demand.

Since March of 2020, national rents had climbed 38.4 per cent —or an extra $182 a week and $9442 a year.

This significant increase had prompted many households to adapt by forming larger households, particularly in capital 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.

First quarter, 2025: Changes in rents, yields, vacancies

▲ Source: RPData, Cotality

As well, migration data pointed to easing demand, with net overseas migration in the year to September 2024 coming in at just under 380,000 people—more than 30 per cent lower than the previous year’s peak.

Despite the easing in demand, advertised rental listings remained well below average. Around 99,000 rental properties were listed for rent nationally over the four weeks to April 6, 22.1 per cent below the historic norm for this time of year.

As a result, vacancy rates tightened to 1.6 per cent in March, down from 2 per cent in December and just 10 basis points above the record low notched in March 2024.

The March quarter increase was largely driven by units, which rose 2.3 per cent nationally compared with a 1.4 per cent rise in house rents, reversing the recent trend in which houses 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.

As well, the preference for house rent over the past year had widened the gap between median house and median unit rental values, from $38 in June, 2023 to $47 in March.

Across the capitals, Hobart led with a 2.3 per cent increase in rents for the March quarter. Perth (2.2 per cent), Brisbane (1.9 per cent) and Adelaide (1.8 per cent) also posted solid gains.

Despite the recent quarterly rise, Hobart remained the most affordable rental capital, with a median weekly rent of $574. Sydney remained the most expensive, with a median weekly rental value of $781.