National rent value growth stagnating

National rent values saw an increase of 0.4 per cent over the December quarter. The data, coming from CoreLogic, recognised this as the smallest fourth-quarter increase in rents since 2018.

Meanwhile, annual rental increases saw a dip in 2024, climbing 4.8 per cent throughout the year. This is much lower than the 8.1 per cent climb experienced in 2023, and the lowest annual rise since the 3.6 per cent increase in the year to March 2021.

What’s causing this? According to CoreLogic’s economist Kaytlin Ezzy, changes to supply and demand are playing a massive role.

“On the demand side, the easing in net overseas migration was also a factor contributing to softer rental demand, with net overseas migration levels expected to normalise around pre-COVID decade averages by the 26/27 financial year,” she said.

“While on the supply side, the annual value of new investor lending increased by 26.3 per cent over the year to September 2024, increase in investor participation above levels, suggesting a potential net increase in rental stock. Together these factors have supported an easing in vacancy rates over the year, from a low of 1.4 per cent in November 2023 to 1.9% at the end of 2024.”

How renters are tracking

This news will be a welcome sight for renters, who have copped harsh prices in recent years. According to Ezzy, since the pandemic, rents have seen a median rise of 36.1 per cent nationally, equivalent to a rise of $171 per week or $ 8,884 per year.

“Rental affordability continues to be a significant drag on rental growth. The net result has potentially seen some prospective renters delay their decision to leave the family home, while others have looked to form larger share households as a way of distributing the additional rental burden, unwinding the previous shrinking in the average household size that was apparent through the early stages of COVID,” Ezzy said.

Adding further stress is the median income spent to service a rent. At its highest rate since CoreLogic began tracking rental affordability in 2006, renters were spending 33 per cent of pre-tax income to pay rent, as of September 2024.

Good news for renters, however, is the recorded stagnated growth is prevalent across the majority of capitals, especially Sydney and Melbourne, where annual growth went from 9.9 per cent and 11 per cent in 2023 to 3 per cent and 4.1 per cent, respectively, in 2024.

However, Hobart and Canberra were outliers, with rental value growth of 6 per cent and 2.6 per cent, respectively, despite seeing value drops in 2023.

Currently, Sydney remains the most expensive city, with a median weekly rental value of $773. Perth was second, with a median of $695. The cheapest were Hobart at $554 per week and Melbourne at $604.

How’s the yield?

On the flip side, investors may be disheartened by this news. However, CoreLogic highlighted “steady” national gross rental yields, up 3.7 per cent annually, showing a continuation of positive returns.

The data found that yields are approximately 50 bps above the recent low of 3.2 per cent in January 2022. Still, figures remain around 50 bps below the pre-COVID-19 decade average of 4.2 per cent.

Each state and territory saw wildly different changes in yields. Places like Adelaide, Brisbane, and Perth saw yields drop to 3.6 per cent, 3.7 per cent, and 4.2 per cent, respectively.

Meanwhile, Sydney held steady at 3 per cent. Hobart (4.4 per cent), Darwin (6.7 per cent), and Canberra (4.1 per cent) each saw an increase.

[Related: Housing market underperforms in 2024, but long-term growth strong]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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