Rents keep increasing – but at a decreasing rate
Property investors continue to enjoy increases in their rental income, but the rate of growth appears to be slowing, judging by the latest Domain data.
The median house rent in the combined capital cities rose 11.1% in the year to June 2024, compared to 11.5% in the year to June 2023. Capital city unit rents rose 8.6% in the year to June 2024, compared to 26.1% in the year to June 2023.
The rate of growth also slowed between the March and June quarters.
Capital city house rents recorded quarter-on-quarter growth of 3.2% in June; down from 5.0% in March. Capital city unit rents climbed 1.6% in June; down from 3.3% in March.
Why rental growth has been slowing
While the rental market typically eases during winter, that only partly explains this current slowdown, according to Domain.
“Rental growth is slowing in line with a gradual increase in rental availability, driven by a rebalancing of supply and demand pressures,” Domain said.
“Rental demand is easing, as the number of prospective tenants per rental listing has consistently fallen throughout 2024. This aligns with overseas migration passing a peak and being expected to decline further in the year ahead, continuing to ease demand with the federal government-introduced migration strategy that will slow population growth.
“Investors have made a slow comeback, accounting for nearly 36% of new home loans – the highest proportion since 2018. Home ownership is also at the forefront, with incentives in place (such as Queensland doubling the first-home buyer grant, the federal government's Help to Buy shared equity scheme and changes to stamp duty concessions in the ACT, South Australia, Western Australia and Queensland) that will help transition some to being owners or fast-track others to a more affordable purchase.”
Investors might need to adjust their expectations
The bottom line for investors is that while many parts of Australia remain a landlord’s market – with vacancy rates low and rents increasing – the days of astronomical rental growth might be over.
If so, that means we might be transitioning to a more ‘normal’ rental market, where investors can still do well but can no longer assume they’ll enjoy annual rent growth of more than 10% per year.
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