There appears to be some relief in sight for Australian renters with the latest home values index revealing rental growth is losing steam.
The national rental index increased by just 0.1 per cent over the September quarter, the smallest change over a rolling three-month period in four years according to CoreLogic.
Sydney, Brisbane and Canberra all recorded a reduction in rents over the quarter. Canberra experienced the most significant decrease in rents of -0.8 per cent, followed by Sydney (-0.5 per cent) and Brisbane (-0.2 per cent).
Losing steam
Meanwhile, rental growth appears to be losing steam in most other capitals. Melbourne and Perth both recorded a 0.3 per cent rise in rents through the quarter, a sharp slowdown from a year ago when the quarterly trend was up 2.2% and 2.3% respectively.
CoreLogic research director Tim Lawless said the slowdown in rental growth is likely to be due to the easing of net overseas migration, which has reduced by 19 per cent from the record highs in the first quarter of 2023, coupled with rental affordability pressures impacting demand.
"We are definitely seeing more and more evidence now that rental markets have stalled, if not even going into reverse in some cities," he said.
"The rental boom seems to be over... and there's now a sense that we're finally seeing a little bit of relief coming back for renters," he said.
"We've seen a pretty substantial drop in the number of net overseas migrants coming to Australia, with most of that migration tending to flow through directly and immediately to rental demand. So, less migration has probably eased the demand side a little bit," he said.
Hit an affordability ceiling
Mr Lawless said rents are likely to have hit an "affordability ceiling" forcing renters to share rental costs across larger group households and multi-generational households, which is also easing rental demand.
"I think the days of double digit annual rental growth are probably behind us now. Once renters sort of reach an affordability ceiling, then it's very hard for rents to go up further than that," he said.
"We're already seeing renters dedicating about a third of their incomes to paying rent. So I think we're pretty much at that ceiling now, and if rents do go higher, then I think it's going to force a further restructuring of demand and younger folks staying at home with mum and dad longer," he said.
While rents have reduced overall across Sydney and Brisbane, there are several suburbs across both cities, as well as in Melbourne, where rents have bucked the trend and shown strong rates of growth.
Most of these suburbs are in the outer suburbs and city fringes and suggest the rental crisis, combined with cost of living pressures, has forced some households further afield to secure a rental.
Basically, it's more affordable or peripheral pockets of the market that are seeing more resilience in rents, and that's a reflection of the current economic climate, said Eliza Owen, head of research at CoreLogic Australia.
New rental hot spots
"As high cost of living pressures and slowing economic growth weigh on household budgets, rental demand has skewed away from more expensive, central markets to areas a bit further out in our cities and to suburbs that are more affordable," she said.
In Sydney, these include the outer southern suburb of Illawong, where house rents have increased by a staggering 23.8 per cent over the past year.
The southwestern suburbs of Greenfield Park (18 per cent), Prairiewood (17 per cent), Miller (16.8 per cent) and Cabramatta (16.5 per cent) have also seen significant house rental growth.
In Emerald in the Dandenong Ranges, 44 kilometres east of Melbourne's CBD, house rents have increased 16 per cent in the past year. In Edithvale, in the city's outer south, house rents have jumped 15.9 per cent.
Meanwhile, Tullamarine (15.6 per cent) in the outer north and Bayswater North (14.4 per cent) and Mount Evelyn (14.3 per cent), both in the outer east, have also led house rent growth in Melbourne.
And in Brisbane, the affordable Moreton Bay region, 14 kilometres north-east of the CBD has seen the biggest house rental growths in the city, with the suburbs of Banksia Beach (13.1 per cent), Elimbah (12.6 per cent) and Dayboro (12.1 per cent) leading the steep rental growth.
"Eventually these areas should also see a slowing in rent growth, and it seems to be the higher end of the market where rents are dropping off first," Ms Owen said.
