Meanwhile, the ATO has increased its focus on landlords, using rental bond data to ensure compliance. There’s also a growing need for property investors, with questions around whether Generation X will step up to fill the gap.
On top of this, many Australians are feeling the pressure of rising housing costs, and their concerns could influence upcoming political decisions as voters look for solutions to the affordability crisis.
1. Rent increases are slowing down: According to CoreLogic’s Quarterly Rental Review, rental growth stalled in December 2024, with rents rising just 0.4% – the smallest fourth-quarter increase since 2018. Annual rental growth also eased to 4.8%, the lowest annual increase since March 2021.
Data from REA Group’s Rental Report for December 2024 showed the national median rent was $620 per week. Sydney remained the most expensive city to rent in at $730 per week, followed by Perth at $650 and Brisbane at $630. Adelaide’s median rent was $580, making it more expensive than Melbourne, where the median rent was $570.
2. Affordability is holding back rental growth: CoreLogic reports that rental affordability remains a major barrier, slowing down increases in rent. Since the start of COVID, national rents have risen by 36.1%, adding 171perweekor8,884 per year to the median rent. As of September 2024, renters were spending around 33% of their pre-tax income on median rent – the highest proportion since CoreLogic began tracking rental affordability in 2006.
3. House price growth is slowing. According to PropTrack’s Home Price Index, national home prices dropped by 0.17% in December. Despite this, prices are still 4.73% higher than they were a year ago. Capital cities saw a larger decline, falling by 0.25% during the month, while regional areas showed more resilience with a slight increase of 0.03%.
4. House prices are expected to keep rising: According to KPMG’s Residential Property Market Outlook, Australian house prices are forecast to increase by 3.3% in 2025, followed by a 6% rise in 2026. Unit prices are also predicted to grow, with a 4.6% increase in 2025 and 5.5% in 2026. Propertyology adds that 11 of Australia’s 25 largest cities could see property booms in 2025.
5. Investors are taking a different approach: Build-to-Rent (BTR) projects are gaining momentum in capital cities. According to Frank Knight’s Build to Rent Market Update for Q4 2024, Melbourne, Brisbane, and Sydney were the top cities for BTR investment in 2024. At the same time, micro apartments are catching the attention of investors. BMT reports that these compact units are becoming an appealing option in high-demand urban areas.
6. Speculation about interest rates is growing: According to the ASX, 95% of investors expect a rate cut in February, with major banks like ANZ, CBA, and Westpac also predicting a reduction. A Finder survey found that nearly two in five homeowners are struggling to meet mortgage repayments, while one in nine said they would need to sell or seek financial hardship assistance if rates remain unchanged until May.
7. The ATO is keeping a close eye on property investors: Records of approximately 2.2 million landlords, tenants, and property managers will be used to identify underreported income. Rental bond data will be collected twice a year from 2023–24 to 2025–26 to help detect non-compliant landlords, encourage voluntary compliance, and improve risk assessment models. Additionally, the ATO has expanded its foreign resident capital gains withholding (FRCGW) rules, now applying them to all Australian residents who own property.
8. Gen X and the investor shortage: Research from PIPA and PICA has highlighted a critical shortage of property investors, with an estimated 35,000 additional investors needed to help ease the nation’s rental crisis. Despite this shortfall, Gen X is leading the way in property investment, with Propertyology data showing that nearly 40% of this generation owns at least one investment property.
9. Building bites: Australia has already fallen 15,000 homes behind target just months into the federal government’s plan to build 1.2 million new homes by 2029, according to REB. Construction costs have also risen, with CoreLogic’s Cordell Construction Cost Index reporting a 3.4% increase in 2024—the largest annual rise since September 2023. A white paper by InvestorKit analysed 330 regions across the country and identified 25 metropolitan and regional areas that will face critical housing shortages in 2025.
10. Snippets: According to Canstar’s Consumer Pulse Report 2024, housing costs are the primary concern for Australians in 2025, and Property Update noted that many citizens are prepared to hold politicians accountable for failing to address the housing crisis. Additionally, Victoria’s new short-stay levy of 7.5% came into effect on 1 January. The McKell Institute has urged the federal government to implement a National Portable Bond Scheme to further support housing affordability.