Good news for Aussie renters: the once red-hot rental market is finally cooling off in 2025.
But affordability remains a major headache, and finding a place that doesn't blow the budget is still a challenge.
CoreLogic's latest rental market report shows the national rental index rose just 0.1% in December, with a modest 0.4% increase for the December quarter and 4.8% growth for 2024 overall.
According to CoreLogic Research Director, Tim Lawless, it's the slowest annual change in rents we've seen since the early COVID-19 slump in 2021.
"This was the smallest December quarter rise in rents since 2018," Lawless explains. "On a rolling annual basis, we haven't seen an annual change this small since the 12 months ending March 2021, following the early COVID patch of weakness."
Still, there's no denying rents are sky-high compared to pre-pandemic times.
Lawless points out that "the annual change in national rents remains more than double the pre-pandemic decade average of 2.0% per annum."
Why are rents slowing down?
The rental market is cooling for several reasons. A slowdown in net overseas migration has reduced the number of people competing for rentals, easing some pressure on the market.
At the same time, families and roommates are consolidating into larger households, which decreases demand for individual homes.
Meanwhile, affordability remains a critical issue, with rents now consuming nearly a third of household incomes.
This financial strain is forcing many renters to either downsize or move to more affordable areas, further dampening demand.
Despite the broader trend, some cities are bucking the slowdown. Hobart, for instance, saw a major rebound in 2024 with median weekly house rents at $650 per week and units at $510.
"Hobart house rents have moved from being one of the weakest in 2023, when rents fell -3.6%, to one of the strongest in 2024 with a 6.4% increase," says Lawless.
Where are the cheapest and most expensive rentals?
Looking to save on rent?
Darwin remains one of the most affordable options for unit renters, with a median of $580 per week despite leading the country in gross rental yields at 7.9%.
For houses, Adelaide often offers the best bang for your buck, thanks to slower growth and a smaller population.The current median weekly rent for houses is $730 and units come in at $580 per week.
On the flip side, Sydney holds onto its crown as the priciest city in Australia to rent in.
Sydney City Council currently has a listed median house rental of $1,100 per week with units sitting at $900 according to view.com.au's location profile.
High demand and limited supply have kept prices stubbornly high, and Melbourne isn't far behind for houses with a weekly average rent in Melbourne City Council reported at sitting at $740.
However, Melbourne's unit market offers a glimmer of hope for budget-conscious renters, with gross rental yields rising to 4.8% as investor confidence grows at $600 per week.
For renters, 2025 is shaping up to be a mixed bag.
Slower growth might mean fewer rent hikes, but affordability remains a pressing issue.
Lawless says: "CoreLogic's latest metrics show a record level of rental unaffordability, with the median rent consuming a third of the median household income in September."
CoreLogic predicts rental growth will stay subdued in 2025 as migration normalises and household sizes edge closer to pre-COVID norms. However, affordability challenges are unlikely to ease anytime soon.
So, what's the bottom line for renters?
While the market is cooling, rents are still high, and competition for affordable options remains fierce.
Whether you're looking at Darwin's unit market, considering a move to Hobart, or trying to make it work in Sydney, staying informed and planning ahead is key to navigating Australia's ever-changing rental landscape.
READ: How to take the heat out of housing stress and save during the spendy season
READ: Rentvesting: Can you afford to rent and buy an investment property?
