Domain's latest Rent Report for the June quarter of 2024 has revealed that while rental prices across the combined capitals are at record highs, the pace of growth is easing as a slowdown in overseas migration and government initiatives begin to free up supply.

For house rents, the pace of quarterly rental growth was 1.5 times slower than the previous quarter across the combined capitals, halved in Melbourne and Brisbane, and was seven times slower in Adelaide. Growth stalled in Sydney and Perth, and declined in Hobart.

It marks the weakest June quarter for house rents since 2021 in Sydney and Melbourne, and since 2020 in Brisbane, Adelaide and Perth.

House rents, quarterly and annual changes

Capital City Jun-24 Mar-24 Jun-23 Quarterly Change Annual Change Status
Sydney $750 $750 $700 0.0% 7.1% Record (steady)
Melbourne $580 $570 $520 1.8% 11.5% Record (new)
Brisbane $630 $620 $580 1.6% 8.6% Record (new)
Adelaide $595 $590 $540 0.8% 10.2% Record (new)
Perth $650 $650 $580 0.0% 12.1% Record (steady)
Canberra $690 $685 $675 0.7% 2.2% Record (last seen in Dec-22)
Darwin $660 $650 $650 1.5% 1.5% Record (new)
Hobart $540 $550 $530 -1.8% 1.9% $10 lower than the record price set in March Quarter 2024
Combined Capitals $650 $630 $585 3.2% 11.1% Record (new)

Source: Domain Rent Report June 2024

For unit rents, the pace of quarterly growth was halved across the combined capitals. In Brisbane, the pace of quarterly growth was three times slower than in the previous quarter. It stalled in Melbourne, Perth and Hobart, and declined in Canberra and Darwin. 

It marks the weakest June quarter for unit rents since 2021 in Sydney, Melbourne and Brisbane. 

Unit rents, quarterly and annual changes

Capital City Jun-24 Mar-24 Jun-23 Quarterly Change Annual Change Status
Sydney $720 $700 $670 2.9% 7.5% Record (new)
Melbourne $550 $550 $500 0.0% 10.0% Record (steady)
Brisbane $600 $590 $525 1.7% 14.3% Record (new)
Adelaide $480 $460 $430 4.3% 11.6% Record (new)
Perth $550 $550 $480 0.0% 14.6% Record (steady)
Canberra $560 $570 $550 -1.8% 1.8% $10 lower than the record price set in Mar-24
Darwin $530 $550 $520 -3.6% 1.9% $20 lower than the record price set in Mar-24
Hobart $460 $460 $450 0.0% 2.2% $15 lower than the record price set in Jun-23
Combined Capitals $630 $620 $580 1.6% 8.6% Record (new)

Source: Domain Rent Report June 2024

The Domain report also found that vacancy rates in Sydney, Melbourne, Brisbane and Canberra were sitting at a six-month high, Hobart a nine-month high, while Perth and Adelaide were both at two-year highs.

Domain's Chief of Research and Economics Dr Nicola Powell said the easing pace of rental growth is being driven by a few factors.

"Rental growth is slowing in line with a gradual increase in rental availability which will lead to a rebalancing of supply and demand pressures.

"Secondly, rental demand is easing, as the number of prospective tenants per rental listing has consistently fallen throughout 2024. This aligns with overseas migration passing a peak and it’s expected to decline further in the year ahead.

"This trend will continue to ease demand, supported by the federal government-introduced migration strategy aimed at slowing population growth."

Government initiatives designed to help more first home buyers into the market is also expected to further ease rental price growth.

"Increased first-home ownership is imminent, supported by initiatives like Queensland's doubled first-home buyer grant, the federal Help to Buy shared equity scheme, and revised stamp duty concessions in ACT, South Australia, Western Australia, and Queensland.

"These measures aim to facilitate home ownership transitions and improve affordability, further alleviating rental conditions in Australia. All these will provide tenants with further much-needed relief in FY25," Dr Powell said.

The report also found that investors are making a slow comeback, accounting for 36% of new home loans, which is the highest proportion since 2018.

Recent Australian Bureau of Statistics (ABS) lending data also found lending to investors is continuing to rise.

The value of new loans to investors for housing rose 5.6% in April to $10.9 billion, which was 36.1% higher compared to a year ago.

ABS head of finance statistics Dr Mish Tan said lending to investors continued to rise strongly relative to owner-occupiers, driven by increasing loan sizes.

"This likely reflects expectations of higher rental yields and the greater borrowing capacity of investors."

The average size of an investor loan for the purchase of an existing dwelling grew 9.5% since April 2023, from $592,000 to $648,000.

In comparison, the average loan size for an owner‑occupier first home buyer grew 6.8% from $498,000 to $532,000 over the same period. 

The growth in the value of investor loans was strongest in New South Wales and Queensland, increasing 43.9% and 46.4% respectively since April 2023. 

Building approvals on the rise

New data from the ABS revealed a seasonally adjusted 5.5% increase in new dwelling approvals, driven by a surge in apartment approvals.

"The rise in approvals in May was driven by private sector dwellings excluding houses, which rose 16.3%," said Daniel Rossi, ABS head of construction statistics.

Private sector house approvals also increased by 2.1%.

While recent figures show a slight uptick in dwelling approvals (14,175), the number still falls short of the monthly target needed to achieve the government's ambitious plan to revitalise Australia's housing construction.

With the launch of the Housing Australia Future Fund on July 1st aiming to build 1.2 million well-located homes over five years, a monthly average of 20,000 approvals (or 240,000 annually) is necessary to reach this goal.

Photo by Nina T on Unsplash