After four years of rapid increases, the Australian rental market is showing signs of cooling. CoreLogic’s national rental index remained flat in July and August, marking the weakest rental conditions since the early pandemic period.
“Rents have skyrocketed 39% higher between August 2020 and June 2024,” said Tim Lawless (pictured above), research director Asia Pacific at CoreLogic, but the recent months have seen the pace slow significantly.
Annual rental growth has also eased, now at 7.2% – its lowest rate since May 2021 – after peaking at 9.7% in November 2021. Although rental demand remains high, affordability constraints and changing household dynamics are slowing further growth.
One key factor behind the slowdown in rents is affordability.
Since March 2020, Australian wages have risen 12.7%, while rents have surged by 36.1%.
According to CoreLogic, a median-income household now spends 32.2% of its gross annual income on rent—a record high.
“With rental affordability so stretched, patterns of household formation are once again evolving,” Lawless said.
Data from the Reserve Bank (RBA) showed that average household sizes, which shrank during the pandemic, are now growing again as more group and multi-generational households form. This trend is expected to further ease rental demand.
A peak in net overseas migration in early 2023 coincided with the high point of rental growth, particularly in units. However, since then, migration has dropped sharply, with a decline of 58,000 net migrants by the end of the year.
“Less migration helps to explain a further reduction in rental demand,” Lawless said.
Additionally, the completion of new dwellings from the HomeBuilder program and a rise in investor activity are supporting an increase in rental supply, which is helping to alleviate pressure on the rental market.
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