The latest Corelogic Rental Market Report

Key takeaways

The pace of growth across Australian rental markets has eased over the past few months, with CoreLogic’s national rental index rising 0.7% in May, the lowest monthly change since December last year.

Most markets have seen a reduction in rental growth relative to the first quarter of the year when rental demand tends to be seasonally higher.

With rents rising at a faster pace than home values, gross rental yields have continued to trend higher, rising to 3.56% across the combined capitals, the highest gross yield since August 2019.

The pace of growth across Australian rental markets has eased over the past few months, with CoreLogic’s national rental index rising 0.7% in May, the lowest monthly change since December last year.

Most markets have seen a reduction in rental growth relative to the first quarter of the year when rental demand tends to be seasonally higher.

However, the annual pace of rental growth has also eased across most cities, especially across the unit sector where rental growth has been more severe.

Nationally, rents are up 8.5% over the past 12 months, down from 8.9% a year ago and a 9.3% rise two years ago.

Although rental growth has slowed, the easing trend has been gradual.

Over the five years prior to COVID, the national rental index was rising at the average annual pace of just 1.3%.

In this context, and amid stretched rental affordability, an 8.5% annual rise in rents is extreme.

The trend towards a slowdown in rental growth can probably be attributed to an easing in net migration since the first quarter of 2023, as well as rental affordability pressures forcing a change in rental patterns.

Additionally, as the bulge of dwellings associated with the HomeBuilder scheme transitions to completion, logically we should see those homeowners moving out of rental accommodation into their newly built homes.

With rents rising at a faster pace than home values, gross rental yields have continued to trend higher, rising to 3.56% across the combined capitals, the highest gross yield since August 2019.

For most investors, higher yields will be welcome considering variable interest rates for investor loans are averaging 6.7%.

Given the high cost of debt, a large portion of leveraged investors are probably recording a cash flow loss despite the substantial rise in rental income.

About Tim Lawless Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au