For many renters, 2024 was as bad as it gets.
They were faced with entire towns where only seven houses were available for lease, and those that were, often took nearly one-third of their income.
Rental affordability is at an all-time low, having deteriorated in Perth, Adelaide and Sydney, and experts have even invented a new category for people spending three-quarters of their pay on rent — “critically unaffordable”.
But, as economists predict rates to drop sometime between February and May next year, population growth to ease and housing values to level, what does 2025 have in store?
The end is nigh
It might not feel like it but the national rental index has continued a relatively flat run of growth, according to CoreLogic.
It rose just 0.2 per cent in November to be 5.3 per cent higher over the year — the smallest increase since April 2021.
CoreLogic executive research director Tim Lawless said while the figures did indicate some cooling off, there was still plenty of life left in the market.
“At 5.3 per cent annual growth, rents are still rising at more than twice the pre-pandemic decade average of 2.0 per cent, but given the weak monthly change, the annual trend is set to slow further from here,” he said.
Two years ago, rent was increasing at an annual rate of 9.5 per cent.
Now, Perth has recorded the highest annual rate of rental growth in capital cities at 7.8 per cent.
“It will be interesting to see if the rate of rental growth rebounds through the seasonally strong first quarter of the year in 2025, but beyond any seasonality, it looks increasingly like the rental boom is over,” Mr Lawless said.
RMIT University economics lecturer Dr Peyman Kherz said the recent trend did indicate the market was easing.
“This slowdown from the previous year’s growth of over 8 per cent suggests that the rental market may be stabilising,” he said.
“It may not be a cause for excitement for investors hoping for rapid growth, but it could provide some relief to renters facing affordability issues.
“The cooling trend suggests a shift from the previously overheated pace, aligning more with historical averages.”
What does that mean for Australians?
The only capital city where gross rental yields are close to investor mortgage rates is Darwin.
Gross rental yields is the total annual rental income received from a property, measured against its market value as a percentage.
Sydneysiders, in particular, recorded low gross rental yields at 3 per cent, followed by Brisbane at 3.6 per cent.
Regional Western Australia and regional parts of the Northern Territory returned high rental yields, at over 6 per cent.
But when it comes to rents getting cheaper or more housing stock on the market, Dr Khezr said it was important to be measured.
“While the market might be showing signs of cooling, anticipating a significant drop in housing availability or rental prices might be premature,” he said.Australia’s housing market loses steam
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“The factors at play — increased listings and a cooling in sales activity — suggest that while the market is becoming less tight, it’s not necessarily transitioning to a buyer’s or renter’s market.
“It’s important to note that even if interest rate cuts start early next year, it will take some time for a significant decline in the rates, and usually, there are lags until the cuts impact key economic variables.
“A sudden increase in house prices is also unlikely, making next year more likely to be stable with neither significant price increases nor decreases.”
