Rental Prices in Australia: Is Relief Finally in Sight for Renters?

Data from two of the biggest property research houses - Domain and PropTrack - shows the longest period of sustained rental price growth on record in Australia may be coming to an end.

The news provides some much-needed hope for renters, battered by higher and higher rent prices in the midst of an acute housing shortage.

The view from Domain 

Australian Property Monitors just released Domain Rent Report for the December Quarter of 2023 showed that asking rents were at record highs across the combined capitals and all cities, apart from houses in Canberra and units in Darwin and Hobart.

Across the combined capitals, Domain says the average asking rent for houses and units in December was $600 - up 9.1% ($50) for houses on the previous year - and an astonishing 20% ($100) for units.

However, in what Domain describes as a “glimmer of hope” for renters, it says conditions are easing, and rental price growth appears to be slowing.

That’s certainly the case in Sydney and Melbourne.

Both cities have experienced strong annual gains, with house rents up 12.3% since the December quarter of 2022 in Sydney and 14.6% in Melbourne.

But in the final quarter of 2023, the gains were subdued or non-existent, with Sydney house rental prices up 1.4% and Melbourne’s flat.

Similarly, when it comes to unit rental prices, strong annual gains (17.2% in Sydney and 15.6% in Melbourne) didn’t keep going into the last 3 months of 2023, with both cities recording 0% growth.

Domain says vacancy rates for rental properties have pushed up across most capital cities, with Sydney (1.3%), Melbourne (1.2%) and Brisbane (0.9%) at roughly 12-month highs as the country enters the busy “changeover” period for rentals that traditionally comes over the summer period.

But Adelaide (0.4%) and Perth (0.4%) still remain close to record lows.

“Nationally, potential tenants will find greater choice,” says Dr Nicola Powell, Domain's Chief of Research and Economics. 

“Looking ahead, several factors are slowing rental growth — stretched affordability, more renters opting for house shares and a slow return of investors over 2023.” 

“We are also likely to see some renters transitioning to homeownership with the new first-home buyer incentives in place, such as Queensland doubling the first-home buyer grant and the anticipated federal government's ‘Help to Buy’ shared equity scheme, along with a potential interest cut that will improve borrowing capacity and mortgage affordability,” Dr Powell says.

The view from PropTrack

The data from REA Group’s PropTrack December Quarter Rental Prices report makes for an interesting comparison, as it’s similar on some measures, but generally shows stronger continuing rental growth than Domain’s numbers. 

PropTrack says the average asking rent for a house in Australia’s capital cities is $620 a week, up 3.30% over the quarter and 12.70% ($70) over the year.

It says the average capital city unit rent is $590, up 1.70% for the quarter and 18% ($90) on the previous year. 

“There are some signs that rent growth may be slowing,” says PropTrack economist Angus Moore. 

“It is still very challenging for renters and even though there is some relief on the horizon, it won’t be in the immediate term, with rents still growing strongly.”

“At some point, there’s only so much people can pay and that will start to act as a brake on how much further rents can run.”

Domain’s Dr. Nicola Powell agrees.

“We forecast a tipping point to be reached at some stage this year, making a return to a more balanced rental market.” 

Dr Powell points out that there would need to be an additional 30,000 to 60,000 rental properties across Australia to shift to that “balanced market” - that’s where the vacancy rate is between 2-3%.

PropTrack’s Angus Moore thinks some relief may arrive for renters, with a growing number of investors bringing stock to the market in the second half of 2024.

Speaking of investors, Domain figures show the rapid rise in rents across the country has also helped improve yields for investors, a factor which may encourage more to look for returns in the residential property market.