The Australian rental market has recently shown signs of cooling, but for property investors, there are still plenty of positives to take away from the latest data. While seasonal fluctuations in rental prices are happening, the overall picture reveals a rental market that’s stabilising and presenting solid long-term opportunities for those holding property.
Seasonal Uptick in Rents
CoreLogic’s Quarterly Rental Review for March 2025 reported a 1.7% increase in national rents over the first quarter of the year, up from 0.4% in the December quarter. This seasonal uptick signals that, despite broader trends of moderation, there is still healthy demand in the market, particularly for rental units. However, this increase is not all that surprising, as rents typically rise during the first quarter of the year, driven by seasonal demand.
While this is the slowest Q1 growth since 2019, with the annual change now at 3.8%—down from last year’s peak of 8.3%—the reality for investors is that rent increases are still above pre-COVID levels. With rents rising by 39.1% in the past five years, property owners are still seeing significant returns.
The Rise of Units and High-Density Living
One of the more notable developments is the resurgence of unit rents, which saw a stronger-than-expected 2.3% increase in the March quarter compared to 1.4% for houses. This is a positive trend for investors who hold high-density properties, as more renters are opting for apartments, driven by seasonal factors such as increased demand from international students.
For investors, the renewed interest in units presents an opportunity to tap into a market that is performing better than the traditional house rental sector. This uptick in unit rents also helps to narrow the gap between house and unit rents, which had previously widened due to renters seeking more affordable options, such as larger shared housing arrangements.
Tight Supply and Rising Vacancy Rates
Despite the slower growth in rents, the supply-demand imbalance remains in favour of landlords. National rental listings were down by 22.1% from the historical average, and vacancy rates tightened to just 1.6% in March—almost at the record low seen in March 2024. This tight supply continues to push rents higher, despite some moderation in demand.
Cities like Perth, Brisbane, and Adelaide saw strong quarterly growth in rents, with Perth leading the charge at 2.2%. While Sydney and Melbourne showed some recovery after previous quarterly declines, they remain in high demand, reinforcing the strength of these capital city markets.
Good News for Investors: Strong Returns and Stability
For property investors, the outlook remains positive. While some investors might be concerned about the slowdown in rental growth, it’s important to focus on the stability and long-term prospects of the market. The consistent supply-demand imbalance, coupled with tightening vacancy rates, ensures that rental yields remain strong, particularly in key capital cities and growing regional areas.
Additionally, while affordability challenges continue to impact renters, the lack of available rental properties means that investors who are holding property are in a good position to benefit from ongoing rental demand. Even with moderate growth, investors are still seeing their rental returns rise steadily year over year.
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