The latest CoreLogic Housing Value Index offers a comprehensive snapshot of Australia’s rental market, and from a landlord’s perspective, several key trends are emerging.
While property values have recently rebounded to new record highs, rental growth remains moderate. This environment creates both opportunities and challenges that require a balanced, informed approach.
Property values have experienced a measured recovery, with most capital cities recording modest increases. This trend is buoyed by improved market sentiment following recent rate cuts, which have, in turn, supported borrowing conditions. For landlords, the appreciation in property values is a positive indicator of long‐term capital growth. However, it is important to note that such gains have been accompanied by ongoing concerns regarding housing affordability—a factor that continues to influence tenant behaviour and rental demand.
Rental growth moderating
On the rental front, CoreLogic’s report indicates that rental values increased by 0.6% in March. Although this figure represents the second consecutive month of growth, annual rental increases have slowed considerably from previous peaks. This moderation in rental escalation is welcome news for tenants facing affordability pressures and reflects a market that is cautious rather than overheated. For landlords, the resultant effect is twofold. On one hand, rising gross rental yields—now at 3.53% in capital cities and 4.42% in regional markets—suggest a healthier return on investment. On the other, the relatively low yields compared to high holding costs mean that careful cost management remains essential.
Low national vacancy rates continue to support robust demand for rental properties. This trend is particularly significant for landlords who benefit from a consistent tenant base. Nevertheless, a strong rental market must be nurtured responsibly. Excessive rent increases can exacerbate affordability issues for tenants, potentially leading to turnover and a less stable rental income stream. Thus, while market conditions are favourable, adjustments to rent should be made judiciously and with consideration for tenant circumstances.
Strong rental demand in WA & QLD
Regional markets also present interesting contrasts. Certain areas, especially in Western Australia and Queensland, have recorded stronger growth compared to the more mature markets of Sydney and Melbourne. Landlords in these regions may find themselves in a position to capitalise on more dynamic rental environments. However, this potential must be weighed against local economic conditions and the competitive landscape. In every case, a thorough understanding of local trends is paramount.
Economic factors continue to influence the broader market. The gradual easing of monetary policy, alongside modest improvements in consumer sentiment, has contributed to the steady, albeit cautious, recovery observed in property values. Nonetheless, rising maintenance expenses and other operational costs serve as a reminder that improved yields are not without their challenges. Landlords are therefore encouraged to explore strategies that enhance property appeal and operational efficiency without compromising the affordability for tenants.
