Rent growth shows signs of a slowdown as renters and investors reassess

After strong yields in recent years, rent growth is set to slow across Australia next year, according to new data.

Research by property data and analytics provider CoreLogic shows after 35 consecutive increases in rent values to July this year, they have begun to slow in recent months.

The trend is most obvious in regional areas where rent values have been slowing since April last year and appear to have flattened out. In regional Tasmania, where data from 40 suburbs was analysed, rents have fallen by 47.5 percent. This was followed by regional NSW, where of the 353 suburbs analysed, 38.4 percent have recorded a decrease in rents. However, data shows the capitals have also been impacted, with more than 90 percent of Hobart suburbs recording a fall in rent over the past quarter, followed by Canberra at 88.9 percent. In Sydney’s suburbs, there’s a strong contrast between rent values for houses and apartments, with the former recording a fall of 19 percent, while apartment rent values fell just 6.9 percent.

CoreLogic Australia head of research Eliza Owen said there were several factors at play signalling that the trend would continue into 2024. A predicted decline in interest rates could encourage more investors into the market, leading to an increase in the rental supply and therefore lower rent growth. More first homebuyers might also be ready to enter the property market as confidence around the cash rate grows.

Slowing income growth, which was strong during the pandemic, could also lead some renters to reassess their decision to move into more spacious single households and back into more affordable share house options, freeing up more rental stock.

Apartments continue to represent the best yield compared with houses for investors, with significantly lower falls in rents in all Australian capitals, with the exception of Canberra and Hobart where they are in par with corresponding falls in rents for houses.