After 35 months of rising rent values, many Australians are asking: will rent go down in 2024? And it looks like experts are predicting a potential shift in the rental market.
This article explores why rent growth is expected to slow down in 2024 and why it’s crucial for renters and investors alike.
What You Will Learn?
- Understand the factors influencing the rental market in 2024.
- Gain insights from property experts on why rent prices will change this year.
- Prepare for potential changes in the housing market landscape.
Understand the Impact of Interest Rates on Your Rent
Interest rates and rents move together over time. In 2024, major banks are forecasting a decline in the cash rate which might encourage investors to get back into the market.
“A reduction in interest rates could increase demand from housing investors.”
Eliza Owen, CoreLogic’s Head of Research
This increased investment could add to the rental supply, potentially lowering rent growth.
What’s the Role of Income Growth in Rental Demand?
“Income growth could be another metric that slows next year.”
Eliza Owen
During the pandemic, household income growth surged. However, as Owen points out salaries might not grow much this year.
As income growth slows, renting households might adjust their housing preferences, leading to the re-formation of share houses, especially in regional Australia.
Is Rental Affordability Becoming a Concern?
Rental affordability is indeed stretching. High growth in rent values means renters need a larger share of their income to service new rents. Owen mentions, “Renters tend to be on lower incomes, which means there could be a ceiling on how high rents can go.” This could lead to more share-housing or changes in migration patterns to more affordable rental markets.
How Are Sydney and Other Capital Cities Faring?
Most rental markets, including Sydney, are seeing growth flatten out or decline. Canberra rents are in decline, and Hobart house rents might soon follow. Owen states, “Rent values also fell in the 12 months to July across several markets.”
What Does the Data Say About Rental Growth?
Data from CoreLogic shows that monthly rent growth has eased over the past few months. In regional Australia, rent value growth has been slowing since April of the previous year.
How Does the RBA’s Stance Impact the Rental Market?
Property experts are divided on the precise impact of the RBA’s stance on Australia’s rental market, but there’s a general consensus that it will have a significant influence. Here’s a summary of their viewpoints:
Potential for Rent Slowdown:
- Reduced rental growth: With further interest rate hikes unlikely in the near term, experts predict a slowdown in rent increases. CoreLogic’s Eliza Owen expects “modest rental growth” in 2024, compared to the 7.5% surge witnessed in 2023.
- Stabilisation of vacancy rates: Tight vacancy rates, currently around record lows, might stabilize or even rise slightly as affordability pressures ease for some renters.
Upward Pressure Persists:
- Lingering rental demand: Despite the slowdown, rental demand is expected to remain high due to factors like robust employment, student return, and ongoing immigration.
- Investor influence: While investor activity might cool due to rising borrowing costs, existing rental stock will likely stay in the market, limiting significant price drops.
Regional Variations:
- Capital city vs. regional markets: The impact might be more pronounced in capital cities, where rental affordability is already stretched. Regional markets with tighter supply could see more resilient rental prices.
- Inner-city vs. suburban areas: Inner-city apartment rents might face greater downward pressure compared to suburban houses, as affordability concerns weigh on renters.
Overall, experts advise a cautious approach:
- Uncertainty remains: The RBA’s future actions and broader economic conditions will play a crucial role in determining the rental market’s trajectory.
- Market monitoring crucial: Landlords and tenants should closely monitor market trends in their specific locations to make informed decisions.
- The Reserve Bank of Australia’s (RBA) rate hikes in 2023 could be contributing to an early recovery in investment activity.
Further Reading: Learn how interest rates affect rental prices in Soho’s guide.
Are There Any Other Factors Influencing Rent Prices?
Yes, rental affordability challenges are likely to persist. Despite cyclical factors driving a slowdown in rent growth, more can be done to ease rental values.
Proposals for housing reforms, such as increasing the supply of well-located homes and setting minimum standards for rentals, can help.
What’s the Future of Australia’s Rental Market?
While rent growth is expected to slow in 2024, challenges remain. Owen concludes, “The provision of more social and affordable housing can help protect lower income households from extreme fluctuations in rental values.”
More on rent going down in 2024
Q: How does the housing market impact rents?
A: The housing market can have a direct impact on rental prices. If there is a decrease in housing demand, rents may also go down.
Q: What role do interest rates play in rental prices?
A: Interest rates can influence the rental market. Lower interest rates may encourage more people to enter the market as investors, leading to an increase in rental supply and potentially lower prices.
Q: What did the CoreLogic head of research say about rent trends?
A: The CoreLogic head of research, Eliza, mentioned that rent growth is likely to slow down in the near future.
Q: Are rental increases expected to continue?
A: Rental increases may continue, but at a slower pace than before. The market is likely to stabilize, bringing down the growth in rents.
Q: What impact could the Reserve Bank of Australia have on rents?
A: The Reserve Bank of Australia can influence the economy and interest rates. If they implement policies to stimulate the housing market, it may lead to an increase in rental prices.
Q: Will there be more affordable rental markets in 2024?
A: Data has shown that more affordable rental markets may emerge in 2024. This can provide relief for tenants looking for more affordable dwelling options.
Q: Which areas are considered expensive rental markets?
A: Expensive rental markets are often found in major cities or desirable locations where demand is high. These areas typically have higher weekly rents.
Q: Will more people exit the rental market in 2024?
A: It is possible that some individuals may choose to exit the rental market in 2024 if they can afford to purchase their own property due to slower rent growth.
Q: How will base effects affect rent growth?
A: Base effects can impact the calculation of rent growth. If the previous year had a high growth rate, the next year’s growth may appear slower due to the higher base.
