From 2021 to 2024, rental markets tightened considerably, as demand increased, resulting in significant growth in rent prices and the reduced availability of homes for renters. However, new data shows that the market is starting to shift in favour of renters.
Since August 2020, advertised rent prices have increased by 48% according to recent PropTrack data. This is almost five times the growth rate (10.5%) seen in the previous four years.
Over the same period*, typical weekly earnings for employees have increased by only 21%.
Renters have had to allocate a larger proportion of their income to their housing costs while also facing the burden of rising everyday expenses over a period of high inflation.
Those who were looking to rent during that period also faced strong competition, with some people having to offer up to 20% more to secure properties.
Although the past few years have put a strain on renters’ finances, rental market conditions have been shifting in recent months.
Rent growth has eased and prices in many of our capital cities have remained stable due to a number of factors.
The increase in available rentals has been a key factor. With more options on the market, renters have been more willing to relocate in search of more attractive alternatives compared to previous years. This has improved rental turnover rates and stabilised prices. Nationally, both new and total listings were higher in September, October and November 2024 compared with 12 months prior.
Another factor is the softening of demand in the rental market.
The population growth rate has been trending downwards since September 2023 while shared accommodation has increased in popularity due to steep cost of rents. First home-buyer loans have also been increasing, reflecting a possible shift from renting to buying in that cohort. These factors have likely contributed to a lower level of demand relative to the past few years.
With more listings hitting the market, an increase in available stock and less demand, rent prices are not only stabilising but renters now have more choice and face less competition.
They are also having more success negotiating for lower rent prices, particularly in our largest capital cities.
A comparison of median advertised weekly rents on realestate.com.au with median weekly rents for new bonds lodged with state tenancy boards showed that tenants typically paid less than advertised rent prices in 23 out of 34 of Sydney’s local government areas (LGAs) in the September 2024 quarter.
The largest differences, with typical bond prices 9-9.5% lower than typical asking prices, were observed in Fairfield, Lane Cove, and Woollahra councils indicating the success of rent negotiations in these areas.
This is a significant change from the March 2023 quarter when tenants in almost half of Sydney’s LGAs were offering more than the asking price to secure properties.
This likely reflects improvement in rental availability that is benefiting renters.
In Melbourne, weekly rents typically paid by tenants were also lower than the median advertised priced in two-thirds of LGAs in the September 2023 quarter.
Bayside, Nillumbik and Moonee Valley councils recorded the greatest variance between median rental bonds and advertised rents. The typical rental bond was 15%, 12% and 9% less than the typical advertised price of a property.
During the March 2023 quarter, more than a third of Melbourne's councils saw tenants pay over the asking price to rent properties, which is in stark contrast to the current circumstances.
The growth in options and decrease in competition has given renters greater confidence in using their bargaining power to secure a home.
The tendency for actual rent prices to be less than advertised is present not just in Sydney and Melbourne but in Brisbane as well.
While renters in most areas of Sydney and Melbourne typically paid rents under the median asking price, in Brisbane, this was a consistent trend across all LGAs.
Brisbane and Lockyer Valley had the most notable rent-price gaps, with typical rents 13% and 11% lower than the advertised rates, respectively.
The increased scope for negotiation reflects how the market in our third-largest city is shifting in favour of renters.
Following years of tight rental conditions, there are signs that the market is improving.
Despite new rental listings in the latter half of 2024 being 11% lower than the ten-year average (up until 2022), there was a 6% increase in properties coming onto the market compared with the same period in 2023.
This coupled with lower demand for rentals relative to recent years has contributed to the moderation in rent prices and improved conditions for renters searching for a new home.
Their growing confidence will not only increase their willingness to negotiate prices but may also lead to continued growth in rental turnover rates, which has the potential to further boost property listings.
If these conditions persist, we’re likely to see a shift toward a more balanced market with slower rent price increases over time.
This will ease financial pressure on renters who have had to face challenging conditions in the past few years.
