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While the nation’s rental market remains extremely tight, conditions have experienced a sustained easing since last year’s record low.
According to the latest data from CoreLogic, rental values rose just 0.2 per cent over the course of October 2024, with the national vacancy rate increasing to 1.8 per cent – a 40-basis-point increase from the recent record low of 1.4 per cent recorded this time last year.
CoreLogic economist Kaytlin Ezzy noted that the sustained rise in national vacancy rate will be welcome to many, though there is a long way to go as the current figure is still 1.5 percentage points below the pre-COVID five-year average.
Ezzy noted that there are several factors contributing to the slowdown in rental growth, including shifting trends related to migration and lifestyle.
“On the demand side, we have moved past the peak in net overseas migration in the March quarter of last year, which typically feeds directly into additional rental demand.
“Additionally, household formation has recently shifted, reversing the COVID trend of smaller households,” she said.
During the pandemic, many Australians residing in sharehouses decided to give solo living a go, thanks to a drop in rents and increased savings with more time spent at home. Over those years, the average household size shrunk from approximately 2.6 to 2.5, adding demand for around 120,000 homes nationally.
Now, with the recent rises in rental prices as well as the cost of living, that figure is once again growing, with more renters forming larger households.
On the supply side, Ezzy noted that there’s also been positive movement in investor activity, with the value of new investor financing trend higher through much of 2023 and 2024.
“The value of monthly investor commitments rose 29.5 per cent over the year to September, with investors changing capital gains,” she noted.
“In September, investors made up 38.3 per cent of all new financing, well above the 33.8 per cent decade-average, suggesting this uptick has likely helped alleviate some supply-side measures by delivering additional rental stock,” Ezzy added.
Over the course of the year, vacancy rates rose in all the capitals except for Hobart, with the Tasmanian capital continuing to experience tight conditions.
Rates in both Brisbane and Adelaide have risen by 60 basis points over the year to sit at 2.1 per cent and 1.1 per cent, respectively.
Melbourne sits at 1.5 per cent, Sydney at 2.2 per cent, Perth at 1.2 per cent, and Canberra at 2.4 per cent. All experienced increases across the year, though they have not yet reached what would be considered healthy territory.
Looking forward, however, Ezzy anticipates the nation will likely see vacancy rates continue to lift as affordability pressures put further downward pressure on rental growth.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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