Annual rent increases for houses have hit multi-year lows in Sydney, Melbourne, Brisbane, Perth and Adelaide, suggesting a relentless stretch of rising rents may have peaked, a new report has found.
Renters are still feeling the pinch from record high prices but the data in Domain’s Rent Report revealed the lowest September quarter growth rate since 2019 for houses and 2020 for units.
“Australia’s era of explosive rental growth appears to be nearing its end,” Domain’s head of research, Nicola Powell, said.
“After enduring the steepest and longest rental surge in history our latest [report] shows that all capital cities have passed their peak in growth rates and are now decelerating rapidly, with some cities already in decline.”
For rental houses, Sydney recorded its weakest growth rate for a September quarter in four years with annual gains at their lowest in almost three years. However, the average weekly rent was up marginally to sit at a record high $775.
Melbourne house rents marked the weakest outcome for a September quarter since 2021. But the report noted weekly rent remained at a record high of $580.
Rents in Brisbane declined for the first time in just over four years, marking the end of the city’s long growth period.
Rental demand is easing, the report said, with the number of prospective tenants per rental listing on Domain’s website falling to its lowest level since 2019, indicating a better balance between supply and demand.
The shift had been driven by a decrease in demand as more people move into share housing and intergenerational living to alleviate financial strain, the report said. It also noted net overseas migration had decreased 19% since its March 2023 peak. The peak in migration coincided with record rent growth.
Not all capital cities have a potential light at the end of the tunnel. Darwin and Hobart experienced their strongest September quarter since 2020 and 2017, respectively.
Despite the evident slowdown in rental growth, tenants were still grappling with record-high asking rents across all capitals except Brisbane and Canberra, and for units in Hobart.
All capital cities remain firmly a landlords’ market and vacancy rates sit uniformly below 2%, the report said.
Powell said the tide seemed to be turning.
“This is long-awaited good news for renters,” she said.
“For the first time in nine months, quarterly rental growth for both houses and units has stalled across the combined capitals.
“This has slowed annual gains to an almost three-year low across the combined capitals, with most cities at multi-year lows.”
One of the biggest shifts has been a rise in investment activity, the report said, accounting for 38% of new home loans, well above the decade average.
Investors are likely reacting to capital growth potential and seeking to buy before the Reserve Bank of Australia lowers the cash rate, the report said.
