Rent increases continue despite easing pace

Among the capital cities, Hobart reported the highest quarterly rental increase at 2.3 per cent, rising to $574 per week, followed closely by Perth at 2.2 per cent, reaching $710, and Brisbane with a 1.9 per cent increase to $670 weekly.

After a decline in the December quarter, Sydney turned the tables, recording a 1.4 per cent rental increase during the March quarter, now reaching a median weekly rent of $781 across all dwellings, remaining the most expensive city nationwide.

In comparison, Darwin and Melbourne recorded the softest rent increases at 0.3 and 0.8 per cent, respectively.

Despite a nationwide increase in rental prices, CoreLogic economist Kaytlin Ezzy noted that the rise in rent for the March quarter represented the slowest Q1 growth since 2019, when rents grew by just 1 per cent.

“Rental growth is still tracking above the pre-COVID-19 decade annual average of 2 per cent, but the rate of change has slowed considerably,” Ezzy said.

“At 3.8 per cent, the 12-month change is now less than half the recent 8.3 per cent peak recorded over the year to March 2024.”

Units versus houses

While all types of dwellings recorded a rise in rental prices over the March quarter, units lead the charge nationally with a 2.3 per cent growth compared to 1.4 per cent for houses.

Ezzy said the data showed a reversing trend where houses consistently outperformed units.

“The renewed growth in unit rents is likely linked to the seasonal lift in demand from international students who typically favour higher density housing,” Ezzy said.

Additionally, she noted that the growing preference for houses over the past year has increased the gap between median house and unit rental prices, which rose from $38 in June 2023 to $47 by March.

“While still below the $71 gap recorded at the end of 2021, the expanding of the house rent premium has eroded some of the relative affordability advantage that some renters have gained by forming larger share houses,” Ezzy said.

Across the capital cities, Perth saw the most significant increase in house rent, up 2 per cent to $720 p/w, while units in the Western Australian capital saw a 3.3 per cent increase to $653 weekly rent.

Melbourne recorded the smallest house rental increase over the March quarter at 0.3 per cent, reaching a median weekly house rent of $634.

In comparison, units in Melbourne saw a 1.6 per cent rise to $653 weekly rent.

According to CoreLogic data, Adelaide was the only market to record stronger rental growth in Q1, with house rentals increasing by 1.9 per cent compared to 1.2 per cent growth for units.

Sydney remained the most expensive rental market across both property types, reaching a median weekly rent of $816 for houses and $723 for units, recording a 0.8 per cent and 2.4 per cent increase, respectively.

With a median weekly rent of $721, Canberra remained the second most expensive capital for house rents but will soon be overthrown by Perth.

Despite recording the highest rental growth across the nation, Hobart remained the most affordable capital for all dwellings, with a median rental price of $590 per week for houses and $497 for units.

Rental yields

Similarly to rental prices, yields rose by 0.7 per cent over the March quarter, reaching 3.7 per cent – the highest since October 2019 and 18 basis points above the five-year average of 3.56 per cent.

CoreLogic data showed that unit rental yields grew by 8 basis points to 4.55 per cent, while house yields recorded an extra 3 basis points to 3.50 per cent.

Over the quarter, Darwin continued to record the highest rental yields at 6.56 per cent, but was the only capital to see a yield decline, recording a 2.8 per cent rise in dwelling values outpaced the 0.3% lift in rents, pushing yields down by 23 basis points.

Over the quarter, Darwin maintained the highest rental yield among the capital cities at 6.56 per cent, but it was the only capital to see yields decline by 23 basis points.

Canberra saw the smallest yield growth over the March quarter, up just two basis points to 4.13 per cent.

On the other end of the spectrum, Perth recorded the highest yield increase with basis points, from 4.25 per cent to 4.34 per cent, closely followed by Hobart (+7 basis points to 4.43 per cent), Brisbane (+5 basis points to 3.67 per cent) and Sydney (+4 basis points to 3.08 per cent).

CoreLogic said that despite recent gains, national yields remain low compared to holding costs and the pre-COVID-19 decade average of 4.18 per cent.

The report showed that despite rental prices increasing by 38.4 per cent over the past five years, a significant rise in net yields is unlikely anytime soon, especially as annual rent growth continues to slow.

Additionally, households have been spending more income on rent than ever, prompting renters – especially in capital cities – to form larger households

At the same time, net overseas migration has eased, falling over 30 per cent from its peak to around 380,000 in the year to September 2024.

“The further increase in the average household size due to worsening affordability, along with the slowing in population growth, continues to put downward pressure on rental demand and, subsequently, on rental value growth,” Ezzy said.

CoreLogic reported that advertised rental listings remain significantly below average despite softer demand.

In total, nearly 99,000 properties were listed nationally in the four weeks leading to 6 April, which is 22.1 per cent below the typical level for this time of year.

The decreased supply also influenced vacancy rates, which declined to 1.6 per cent in March, down from 2 per cent in December, and 10 basis points above the lowest level recorded in March of last year.

“Given the easing in demand, it’s likely rental growth will remain relatively subdued over the coming quarters, even in the face of tight supply,” Ezzy concluded.