Key takeaways
According to Domain's Rent Report, Australia's rental market may be entering a cooling phase after several years of surging rent prices.
Australia's capital cities have seen rental prices either slow or decline, with Sydney and Melbourne experiencing no growth or declines respectively. Brisbane saw its first decrease in over four years, while Perth and Adelaide saw slower growth. Unit rents in Sydney and Melbourne also remained steady or declined.
For investors, the slowing rental market doesn't necessarily mean bad news. Increased investment activity could help bring more rental properties to the market.
After several years of surging rent prices, Australia’s rental market may finally be entering a cooling phase.
According to Domain's Rent Report for the September quarter of 2024, growth in rental prices has slowed significantly, marking the weakest September quarter since 2019 for houses and 2020 for units.
While renters are still dealing with historically high prices, this slowdown could signal the end of the post-pandemic rental boom.
As Dr. Nicola Powell, Domain’s Chief of Research and Economics, put it:
“Australia’s era of explosive rental growth appears to be nearing its end.
After enduring the steepest and longest rental surge in history, our latest Domain Rent 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 renters who have been grappling with affordability issues, this is a much-needed respite.
Major cities see the weakest growth in years
In previous years, Australia’s capital cities saw rental prices skyrocket as demand far outstripped supply.
However, the September quarter of 2024 is showing a very different picture.
Across Sydney, Melbourne, Brisbane, Perth, and Adelaide, the data shows that rent growth has either slowed significantly or, in some cases, started to decline.
Table 1: House rents, quarterly and annual changes
| HOUSES | MEDIAN RENTAL ASKING PRICE | ||||||
|
Capital City |
Sep-24 |
Jun-24 |
Sep-23 |
Quarterly change | Annual change |
Status |
| Sydney | $775 | $760 | $720 | 2.0% | 7.6% | Record (new) |
| Melbourne | $580 | $580 | $550 | 0.0% | 5.5% | Record (steady) |
| Brisbane | $625 | $630 | $590 | -0.8% | 5.9% | $5 lower than Jun-24 record |
| Adelaide | $600 | $595 | $550 | 0.8% | 9.1% | Record (new) |
| Perth | $660 | $650 | $600 | 1.5% | 10.0% | Record (new) |
|
Canberra |
$680 |
$685 |
$660 |
-0.7% |
3.0% |
$10 lower than record last seen Dec-22 |
| Darwin | $680 | $660 | $650 | 3.0% | 4.6% | Record (new) |
| Hobart | $550 | $540 | $530 | 1.9% | 3.8% | Record (last seen in Mar-24) |
| Combined Capitals |
$650 |
$650 |
$600 |
0.0% |
8.3% |
Record (steady) |
| Combined Regionals |
$550 |
$550 |
$520 |
0.0% |
5.8% |
Record (steady) |
For houses:
- Sydney recorded a modest 2% increase in rents, marking the weakest September quarter growth in four years. The weekly rent sits at a record high of $775, but growth is notably tapering off.
- Melbourne saw no growth at all, with house rents holding steady at $580 per week, the lowest quarterly growth for a September quarter since 2021.
- Brisbane experienced its first decline in over four years, with house rents dropping by 0.8% to $625 per week. This marks the end of what was the city’s longest and steepest growth period.
- Perth and Adelaide continued to see growth, albeit at slower rates. Perth's house rents increased by 1.5% to $660, and Adelaide’s by 0.8% to $600, both new record highs.
Table 2: Unit rents, quarterly and annual changes
| UNITS | MEDIAN RENTAL ASKING PRICE | ||||||
|
Capital City |
Sep-24 |
Jun-24 |
Sep-23 |
Quarterly change | Annual change |
Status |
| Sydney | $720 | $720 | $680 | 0.0% | 5.9% | Record (steady) |
| Melbourne | $550 | $550 | $520 | 0.0% | 5.8% | Record (steady) |
| Brisbane | $590 | $600 | $550 | -1.7% | 7.3% | $10 lower than Jun-24 record |
| Adelaide | $495 | $485 | $450 | 2.1% | 10.0% | Record (new) |
| Perth | $570 | $550 | $500 | 3.6% | 14.0% | Record (new) |
| Canberra | $550 | $560 | $550 | -1.8% | 0.0% | $20 lower than Mar-24 record |
| Darwin | $550 | $530 | $520 | 3.8% | 5.8% | Record (last seen in Mar-24) |
| Hobart | $460 | $455 | $450 | 1.1% | 2.2% | $20 lower than Mar-23 record |
| Combined Capitals |
$630 |
$630 |
$600 |
0.0% |
5.0% |
Record (steady) |
| Combined Regionals |
$490 |
$480 |
$450 |
2.1% |
8.9% |
Record (new) |
For units:
- Sydney rents held steady at $720 per week, unchanged from the previous quarter. This marks the weakest performance for a September quarter in four years.
- Melbourne also saw no growth for the second consecutive quarter, remaining at $550 per week.
- Brisbane experienced a 1.7% decline in unit rents, falling to $590 per week, the first decrease in over four years.
Dr. Powell highlights the significance of these figures:
“This is long-awaited good news for renters, 38% of which are renting to save for a property.
For the first time in nine months, quarterly rental growth for both houses and units has stalled across the combined capitals.”
Affordability issues hold back further growth
Affordability has been a critical issue for many Australians in recent years, with high rents forcing tenants to make difficult choices.
According to Domain’s research, 48% of renters who moved in the last 12 months had to shift further away from their desired locations due to affordability constraints.
Dr. Powell explains:
“Undoubtedly, affordability is a significant factor contributing to this slowdown and will likely continue to restrict further growth.”
Rents can only increase so much before tenants reach their financial limits.
This affordability ceiling appears to be playing a role in the current deceleration of rental growth.
Easing demand and increased investment activity
Another key factor in the slowdown is a shift in market dynamics.
The number of prospective tenants per rental listing has fallen to its lowest level since 2019, indicating that demand is easing.
This suggests that supply and demand are beginning to find a more balanced footing, offering some relief for those in the rental market.
On the supply side, we’re seeing a rise in investment activity.
The value of investor loans has increased by 35% annually, with investors looking to capitalise on potential price gains before the RBA potentially lowers the cash rate, which could reignite housing activity.
Currently, investors make up 38% of new home loans, a figure well above the decade average.
As Dr. Powell notes:
“One of the biggest shifts has been a rise in investment activity, with the value of investor loans rising by 35% annually.
Investors are likely reacting to capital growth potential and seeking to purchase before the RBA lowers the cash rate.”
This influx of investor activity could boost rental supply in the coming months, which would further alleviate pressure on rents.
Vacancy rates remain tight
Despite the slowdown in rental growth, vacancy rates across Australia’s major cities remain tight.
Sydney’s vacancy rate dropped to 1.1%, Melbourne’s increased slightly to 1.3%, and Brisbane held steady at 0.9%.
These figures reflect a market where demand remains high relative to available properties, even as rents stabilize.
Interestingly, Hobart saw a notable improvement in its vacancy rate, dropping from 1.0% to 0.5%.
Canberra and Darwin also saw small declines in vacancy rates, indicating that renters in these cities are still struggling with limited supply.
Table 3: House and unit combined rental vacancy rates
| HOUSE AND UNIT COMBINED | RENTAL VACANCY RATES | |||||
|
Capital City |
Sep-24 |
Jun-24 |
Sep-23 |
Quarterly
percentage point change |
Annual
percentage point change |
| Sydney | 1.1% | 1.2% | 0.9% | -0.1 ppt | 0.2 ppt |
| Melbourne | 1.3% | 1.2% | 0.9% | 0.1 ppt | 0.4 ppt |
| Brisbane | 0.9% | 0.9% | 0.7% | 0.0 ppt | 0.2 ppt |
| Perth | 0.5% | 0.6% | 0.3% | -0.1 ppt | 0.2 ppt |
| Adelaide | 0.4% | 0.5% | 0.3% | -0.1 ppt | 0.1 ppt |
| Hobart | 0.5% | 1.0% | 1.0% | -0.5 ppt | -0.5 ppt |
| Canberra | 1.6% | 1.7% | 1.6% | -0.1 ppt | 0.0 ppt |
| Darwin | 0.7% | 0.7% | 0.7% | 0.0 ppt | 0.0 ppt |
| Combined Capitals | 1.0% | 1.0% | 0.8% | 0.0 ppt | 0.2 ppt |
| Combined Regionals | 0.8% | 0.9% | 0.8% | -0.1 ppt | 0.0 ppt |
| National | 0.9% | 1.0% | 0.8% | -0.1 ppt | 0.1 ppt |
What does this mean for renters and investors?
For renters, the message is clear: while relief is on the horizon, it will likely be gradual.
Rents remain at record highs, and any declines are expected to be modest.
However, the days of steep rent increases may be behind us, as the market adjusts to a new equilibrium.
For investors, the slowing rental market doesn’t necessarily mean bad news.
In fact, many are now shifting their focus towards capital growth opportunities, especially as the RBA looks set to lower interest rates in the near future.
Increased investment activity could help bring more rental properties to the market, offering further relief to tenants.
As Dr. Powell sums up:
“It has been a while since we’ve been able to bring good news to renters, who make up approximately 30% of households.
Our research tells us that affordability is a significant factor, and it’s likely that the current dynamics will continue to restrict further growth.”
