Rental Decline Brings Relief for Sydney and Melbourne Tenants

A steep drop in asking rents across inner Sydney and Melbourne has transformed several suburbs into tenant-friendly markets. CoreLogic data reveals that rents in some areas fell by up to 7% over the past three months, offering potential savings of as much as $852 for renters but emphasising evolving rental market dynamics.

Rising vacancy rates and reduced demand for rental properties in Sydney and Melbourne have driven these changes. Factors include a slowdown in net overseas migration and shifts in household dynamics, with more people sharing living spaces. Despite a persistent undersupply of rental properties nationally, certain pockets of the rental market are now leaning in favour of tenants.

In Sydney, suburbs such as Eastlakes, Banksia and Rockdale saw the sharpest declines in house rents, with reductions between 5.7% and 6.9%. This equates to three-month savings ranging from $600 to $852. Meanwhile, apartment rents in areas like Ultimo and Enfield dropped by as much as 4.7%, saving tenants close to $336 over the same period. Comparable trends are evident in Melbourne, with suburbs like Windsor and South Yarra experiencing declines that trimmed total rent costs by as much as $540.

Experts anticipate that rental conditions may continue to ease in 2025, particularly in cities like Sydney and Melbourne, if migration levels normalise further. As of December, rental vacancies in Sydney rose to 2.4%, up from a low of 1.8% during the migration peak of September 2023. Melbourne followed a similar pattern, with vacancy rates rising to 1.7%. Reduced migration, projected to return to pre-pandemic levels of 225,000 annually by FY 26/27, could scale back rental demand by approximately 90,000 households, further affecting rent prices.

On a national scale, the rental market still reflects mixed trends. While Sydney and Melbourne recorded falling rents, other cities like Hobart, Perth and Adelaide noted rent increases in the last quarter of 2024. However, experts emphasise that this emerging trend of easing rents in major cities may offer a welcome reprieve for tenants grappling with affordability challenges.

Source: CoreLogic, The Australian