Australia’s rental market has seen a notable shift, with dwelling asking rents recording the largest declines since the early days of the Covid pandemic. Over the past 30 days leading up to 12 August, capital city rents have fallen by an average of 0.5%, signalling a change in the rental landscape that many tenants may welcome.
Sydney, typically one of the most expensive cities for renters, recorded a 1.0% drop in combined rents, bringing the average weekly rent down to $829. Melbourne followed suit, with a 0.6% decline, lowering the average rent to $632 per week. Surprisingly, Brisbane and Perth, often regarded as more stable markets, also experienced falls of 0.5% and 0.6%, respectively. Hobart saw the steepest decline, with rents dropping by 1.6%, making it the city with the most significant fall in market rents among the capitals.
While these decreases might suggest a broader trend, not all cities are experiencing the same fate. Adelaide and Darwin bucked the trend, with Adelaide’s house rents rising by 1.1% and Darwin seeing a significant increase of 6.4%. This contrast highlights the varied dynamics at play across different regions and property markets within Australia.
The rent reductions were particularly noticeable in coastal regions and some central business district (CBD) locations. Queensland’s Gold Coast, a popular destination for both residents and tourists, recorded a 1% decline, while Victoria’s Mornington Peninsula saw a 1.4% fall. Sydney’s CBD, a crucial area for the city’s rental market, experienced a more significant drop of 1.6%.
Despite these reductions in asking rents, the overall rental market in Australia remains tight. National rental vacancy rates held steady at 1.3%, indicating that the demand for rental properties still outstrips supply. This suggests that while rents may be dipping slightly, the broader issues within the rental market, such as limited availability and high demand, persist.
In Sydney, the rental vacancy rate remained unchanged at 1.7%, with 12,123 rental dwellings vacant as of July 2024. Melbourne also saw a stable vacancy rate of 1.5%, with a slight increase in the number of vacant dwellings, rising from 7,864 in June to 7,979 in July. Over the past year, Sydney’s vacancy rate has shown consistency, while Melbourne’s rate has inched up by 0.2% compared to July 2023.
Canberra, the nation’s capital, recorded the highest rental vacancy rate among the states and territories at 2.2%, marking a slight increase from 2.1% in June 2024. On the other hand, Perth and Adelaide reported some of the lowest vacancy rates, both standing at 0.7%, reflecting the ongoing tightness in these markets. Darwin’s vacancy rate decreased from 0.9% in June to 0.7% in July, further tightening the market in the Northern Territory’s capital. Hobart also saw a notable decline in vacancies, with the rate falling from 1.5% in June to 1.2% in July.
Overall, the total number of rental vacancies across Australia now stands at 39,701 residential properties, a slight decrease from the 40,486 vacancies recorded in June 2024. However, this figure is still above the 38,864 vacancies seen in July 2023, indicating that while there is a slight easing in some areas, the market remains challenging for many renters.
The Sydney CBD recorded a significant increase in its vacancy rate, jumping from 5.0% in June 2024 to 5.5% in July 2024. This suggests that while the city as a whole has seen a steady rental market, the CBD area is experiencing a different dynamic, possibly due to changing work patterns and preferences post-pandemic. Melbourne’s CBD, in contrast, saw a slight decrease in its vacancy rate, dropping from 4.3% in July 2023 to 4.0% in July 2024. This indicates a marginal increase in demand for rental properties in Melbourne’s city centre. Brisbane’s CBD continued to experience strong demand, with a low vacancy rate of 2.5%, while Canberra’s CBD saw a dramatic decrease from 4.0% in July 2023 to 2.7% in July 2024.
These figures suggest that the rental market in Australia is in a state of flux, with some areas experiencing a softening in rents and vacancies, while others remain tightly held. The falls in asking rents, while significant in the context of recent history, are still minor compared to the massive increases seen across the country since 2021. The rental market, which has been under immense pressure with rising rents and low vacancies, is showing signs of easing, but the broader rental crisis is far from resolved.
According to Louis Christopher, Managing Director of SQM Research, the recent declines in capital city rents are the largest recorded since 2020 when Covid first disrupted the country. These falls have been broad-based, with larger declines noted in major capital cities and coastal regions. However, he also cautions that rents remain high, and this retracement is minor compared to the steep rises in recent years. The ongoing low national rental vacancy rate of 1.3% indicates that the rental crisis is still very much alive, even as the market begins to stabilise.
For tenants, these changes may bring some relief, particularly in cities where rents have been rising rapidly. However, the overall picture remains one of a market in transition, with regional variations reflecting different economic conditions, demographic trends, and housing supply issues. The recent rent decreases, while welcome, do not signal an end to the challenges facing Australia’s rental market. Instead, they suggest a temporary shift in market dynamics, driven by a combination of factors, including changes in demand, shifts in population, and the broader economic environment.
As Australia continues to navigate the post-pandemic economic landscape, the rental market is likely to remain a focal point for both tenants and policymakers. The recent trends in asking rents and vacancy rates offer a snapshot of a market in motion, with potential implications for renters, property investors, and the broader economy. Whether these trends will lead to more substantial changes in the rental market or simply represent a brief respite in an otherwise challenging environment remains to be seen. For now, renters in some of Australia’s capital cities can take some comfort in the slight easing of rental pressures, even as the broader market continues to grapple with the complexities of supply and demand.
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