The end of the rental boom may be on the horizon, following a 39% increase in rents from August 2020 to June 2024, compared to a modest 5.4% rise during the same period pre-pandemic.
The end of the Australian rental boom is in sight!
The slowdown in rental growth is particularly noticeable in the unit sector.
Nationally, the annual increase in unit rents has dropped from 14% in the 12 months leading up to April 2023 to 6.7% in the most recent 12-month period.
For houses, the peak rental growth occurred earlier, hitting 10.8% for the 12 months ending September 2021, and has since moderated to 7.4% over the past year.
Table: Change in Dwelling Rents (Core Logic)
Capital City | 3 months to Aug 24 | 12 months to Aug 24 |
Sydney | -0.3% | 6.4% |
Melbourne | 0.8% | 7.0% |
Brisbane | 0.1% | 6.0% |
Adelaide | 1.4% | 8.4% |
Perth | 0.7% | 11.6% |
Hobart | -0.3% | 3.7% |
Darwin | 0.5% | 0.8% |
ACT | -0.5% | 2.7% |
Why the Rental Growth Slowdown?
There are a few signals suggesting the Australian rental boom is set to end.
Affordability: Wages rose by 12.7% from March 2020 to June 2024, while rents jumped 36.1%, pushing median income households to spend a record 32.2% of their gross income on rent.
Household Formation: Post-pandemic, household sizes are increasing again as group and multi-generational living become more common.
Migration Impact: Net overseas migration peaked at 165,000 in early 2023 but fell to 107,000 by late 2023, reducing rental demand.
New Dwellings: As new homes continue to be completed under the HomeBuilder program, we can expect rental demand to gradually decrease, addressing the impact of previous building delays.
Investor Activity: Investor activity is up, with lending volumes increasing by 10.7% and values by 30.2% over the past year. This boost in investment is likely easing supply-side pressures in the rental market.
If you would like to know more about how we can help you build a property portfolio give us a call on 0423 344 286 or email us at hello@mindsetproperty.com.au, or simply connect with our Director Peter Theodorou.
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Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.
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