Residential property investors face the dual problem of higher mortgage rates and moderating income as monthly rental growth hits lowest rate in four years as capital city demand declines
The Australian rental market has experienced its slowest growth in four years, with CoreLogic’s monthly Chart Pack showing a modest 0.1% increase in national rents during July.
CoreLogic Australia economist Kaitlyn Ezzy said the easing in the monthly growth trends marks a stark contrast to the 39.7% surge in rents recorded over the past five years.
Ms Ezzy said the slowdown was a positive sign for renters, who have faced a significant increase in median weekly rental payments—up by approximately $180 over the past five years.
“July’s small rise in national rents signals a broader cooling trend across the country and will provide some renters a much-needed respite after years of high demand and steep increases,” she said.
Results were varied across the country with rents rising 0.6% in Adelaide and 0.3% in Melbourne and Perth, while remaining flat in Darwin and Canberra. In contrast, rents have declined in Sydney (-0.1%), Brisbane (-0.1%), and Hobart (-0.3%).
“The varied rental growth across capitals highlights an affordability ceiling in major cities. With tenants unable to borrow more to cover rent, many are turning to alternatives such as shared housing, relocation to more affordable areas, or leaving the rental market altogether and buying their own homes,” she said.
At an annual level, CoreLogic’s Rental Value Index recorded the smallest 12-month change in three years, with national rents up 7.8% in the year to July, down from a recent peak of 8.6% in April.
This slowdown is largely driven by a reduction in growth rates in the capitals, from 9.7% in February to 8.0% in July, while regional areas have seen growth accelerate from 5.4% to 7.1% over the same period.
Perth recorded the strongest rental growth, with annual rents increasing by 12.7% followed by Regional WA at 10.6%.
“Regional areas are benefiting from lifestyle changes, relative affordability, and migration trends,” Ms Ezzy said.
“The high cost of renting is also likely to be motivating more people with the financial means to service mortgage repayment and job security, to buy their first home, and we’re also seeing investors take notice too.”
Lending to first-home buyers rose 1.5% to $5.3 billion in June, to comprise 29.2% of new owner-occupier finance. Similarly, new housing lending increased in June, up 1.3% to $29.2 billion, driven by a 2.7% rise in investor lending, with investors motivated by capital gains rather than high rental returns.
Despite an easing in net overseas migrations and a deceleration in rental growth, substantial relief for the rental market seems unlikely in the short term.
“Low supply will likely continue to put upward pressure on rents, albeit at a slower pace,” she said.
“With dwelling approvals and commencements at historic lows, providing sufficient new housing will not be a quick fix and remains a genuine challenge for policymakers, the property industry and of course tenants.”
