Rent growth shows signs of a slowdown as renters and investors reassess
There are still strong yields to be had if you know what and where to buy
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After strong yields in recent years, rent growth is set to slow across Australia next year, according to new data.
Research by property data and analytics provider CoreLogic shows after 35 consecutive increases in rent values to July this year, they have begun to slow in recent months.
The trend is most obvious in regional areas where rent values have been slowing since April last year and appear to have flattened out. In regional Tasmania, where data from 40 suburbs was analysed, rents have fallen by 47.5 percent. This was followed by regional NSW, where of the 353 suburbs analysed, 38.4 percent have recorded a decrease in rents. However, data shows the capitals have also been impacted, with more than 90 percent of Hobart suburbs recording a fall in rent over the past quarter, followed by Canberra at 88.9 percent. In Sydney’s suburbs, there’s a strong contrast between rent values for houses and apartments, with the former recording a fall of 19 percent, while apartment rent values fell just 6.9 percent.
CoreLogic Australia head of research Eliza Owen said there were several factors at play signalling that the trend would continue into 2024. A predicted decline in interest rates could encourage more investors into the market, leading to an increase in the rental supply and therefore lower rent growth. More first homebuyers might also be ready to enter the property market as confidence around the cash rate grows.
Slowing income growth, which was strong during the pandemic, could also lead some renters to reassess their decision to move into more spacious single households and back into more affordable share house options, freeing up more rental stock.
Apartments continue to represent the best yield compared with houses for investors, with significantly lower falls in rents in all Australian capitals, with the exception of Canberra and Hobart where they are in par with corresponding falls in rents for houses.
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The typically busy spring season for the housing market was a dud, and the summer isn’t looking much brighter.
Housing services companies like Zillow Group and Rocket RKT +3.78% were loud and clear last week on earnings calls: Rocket CEO Varun Krishna called the quarter through June “one of the toughest spring housing markets in years.”
Jeremy Hofmann, Zillow’s chief financial officer, said on a conference call that the company predicted earlier this year that the market for mortgages would be flat. “We actually now think it’s going to be down low-to-mid-single digits,” he said.
The rest of 2026 will remain challenging for mortgage origination volume, says KBW analyst Bose George. The question now is what happens in 2027. “If mortgage rates remain [around] 6.75%, I think that’s going to be challenging even for next year,” he says.
But what’s bad news for mortgage companies could be a positive for bargain hunters. Buyers can expect prices to grow more slowly—or mildly decline—with less competition as long as mortgage rates remain unpredictable.
Mortgage rates at the beginning of the year were solidly below year-ago levels, notes Zillow senior economist Kara Ng. But they surpassed last year’s levels recently, she adds, referencing Freddie Mac’s weekly survey of 30-year fixed mortgage rates. Last week’s reading, at 6.69%, was higher than year-ago levels for the first time in 2026.
“From the affordability point of view, it’s going to get more challenging in the second half of the year,” she says. “And when affordability gets more challenging, that impacts sales and home price appreciation.”
Mortgage application data tracked by the Mortgage Bankers Association has cooled since the beginning of the year. The trade group expects that the number of mortgage originations in the remaining two quarters will lag behind last year’s levels, after exceeding 2025 levels in the first half.
Rocket’s early-stage data—which the company told Barron’s it derives from its brokerage Redfin, demand for its mortgage products, and signs in its servicing portfolio that a homeowner is preparing to refinance or move—“leads us to expect the third quarter mortgage market to be smaller than the second,” Chief Financial Officer Brian Brown, said on the company’s call. He added that such an occurrence is “something the industry has not seen since 2022.”
Prices will be about flat nationally, Ng says. Zillow’s most recent forecast, which shows how values are expected to change in the year ending June 2027, show them dropping in roughly half of the 100 largest U.S. metros for which data is available.
Buyers aren’t rushing in at a time when mortgage costs are rising and unpredictable. But those with the right combination of patience and cash could stand to benefit. “If you are financially qualified to buy a starter home, you are facing less competition and you’re more likely to get a price cut,” Ng says.
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