Rents Are Dropping in Parts of Sydney – What Does This Mean for Investors?

After several years of relentless rent hikes, it seems the tide might be turning—at least for now and in certain locations.

PropTrack’s latest rental market data shows that nearly three-quarters of NSW suburbs experienced either stagnant or declining advertised rents over the past three months.

That’s a marked change from the skyrocketing rental increases we’ve seen in recent years.

But what does this mean for you as a property investor or as a tenant trying to navigate this complex market?

Let’s unpack what’s really going on.

Where are the biggest rent drops happening?

Some of the steepest falls occurred in suburbs like Concord West, Sylvania Waters, Chipping Norton, Greystanes, and Camperdown, with weekly rents dropping between $100 and $200.

For tenants, that’s a potential saving of up to $10,000 per year, a welcome relief in a cost-of-living crisis.

These suburbs tend to share a few common traits:

• They’ve seen a rise in investor activity

• Many have experienced increased housing supply, particularly in the form of new apartment developments

• Some have higher baseline rents, so even a modest decrease feels more noticeable

But let’s be clear: this easing in rental pressure is not uniform across the board. [/notes/]

In fact, demand remains intense in areas like Sydney’s eastern suburbs and inner west, where properties are still being leased at or above the asking price.

In those competitive markets, renters are still offering more just to secure a lease.

What’s behind the shift?

There are a few forces at play here.

Firstly, investor activity has quietly returned to the market, adding much-needed stock to the rental pool.

While investor lending is still well below peak levels, it has been rising steadily over the past year, and in some suburbs, that’s enough to shift the supply-demand balance, at least temporarily.

Secondly, tenants are adjusting their behaviour.

We’re seeing more people opting for shared accommodation, or moving back in with family to save money.

In some cases, entire families are relocating out of Sydney altogether—often to Queensland—seeking more affordable living conditions and a better quality of life.

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That change in demand dynamics, even if subtle, takes some pressure off prices.

Is this the start of a broader rental downturn?

No that's not likely.

Sure, rents have flattened or declined in some areas, but let’s keep this in perspective.

Rents surged so rapidly over the past couple of years, that some areas saw 20–30% increases, that even a small correction doesn't suddenly make housing affordable again.

In fact, many tenants are still under significant financial stress, especially those in competitive or high-demand areas.

PropTrack economist Anne Flaherty rightly pointed out that while conditions have eased, it’s unlikely we’ll see dramatic falls from here.

Rents may still rise in 2025, just not at the unsustainable pace we saw in 2022 and 2023.

And what happens next will depend heavily on two factors: housing supply and population growth.

If investor activity continues to grow and new supply comes online faster than expected, we could see more stability in the rental market.

But if population growth remains strong, particularly from overseas migration, and supply doesn’t keep pace, then any relief for tenants could be short-lived.

What does this mean for property investors?

For seasoned investors, this isn’t a cause for concern, it’s a signal to be strategic.

Yes, some suburbs are seeing softening rents, but that doesn’t mean the entire Sydney rental market is weakening.

Ultimately, property remains a long-term game.

Short-term fluctuations like the ones we’re seeing in certain suburbs don’t change the underlying fundamentals: Australia has a housing shortage, and Sydney remains a magnet for people, jobs, and capital.

So while tenants in some areas may finally be getting a breather, astute investors should be looking beyond the headlines to see what this shift reveals about changing market dynamics and how to use them to their advantage.

This short term downturn also highlights the importance of investing in the right areas, and avoiding areas where there are large number of investors owning properties.

At Metropole, we keep a careful track of the demographics of locations where we chose to invest and buy in areas that are gentrifying and have a large number of owner occupiers, preferably from varying demographics including young families, established homeowners with significant equity in their homes and others who bought 8 or 10 years ago and have paid off half their mortgage.