Rents have been one of the biggest stories in property over the past few years. Across the country, tenants have faced sharp price increases as vacancy rates tightened to record lows. But now, with interest rates falling and more supply trickling into the market, is rental growth finally slowing down?
The short answer is not yet, but we are seeing shifts in certain locations.
While demand remains strong, we’re seeing a return to a more balanced market in some cities. Instead of the extreme competition of the past two years, where tenants were offering above the asking price just to secure a rental, markets are normalising. Some properties that once attracted 12-15 applicants are now seeing two or three. That’s still solid demand, but it’s a noticeable shift from the chaos of 2022 and early 2023.
Across my clients’ portfolios, we’re still seeing rents rising, but the pace of growth has slowed in some locations. In Brisbane, for example, some landlords have only been able to increase rents by a few dollars per week, while in Perth, some properties are still achieving strong rental gains due to ongoing demand.
One of the most interesting rental markets right now is Melbourne, which has seen significant rent increases over the past three years.
For a long time, Melbourne’s rental market struggled. The impact of extended COVID lockdowns, falling investor activity, and affordability constraints kept rental growth subdued. Investors were also hit with rising land taxes, which caused many to exit the market, reducing the available rental stock.
Now, with fewer properties available, rents have jumped to compensate for the lack of supply. The return of migration, both interstate and international, has only added to that pressure. As a result, we’ve seen Melbourne’s rental yields improve, making it a more attractive market for investors again.
We’re also seeing new investors enter the Melbourne market to take advantage of improved yields. The investor exodus over the past few years created opportunities, and with more buyers returning, rental stock is beginning to stabilise. But demand is still high, and there’s no sign of rents falling anytime soon.
Regional Queensland has been another strong performer, with select areas still seeing solid rental gains. Townsville, for example, has experienced nearly 9% rental growth over the past 15 months, making it one of the standout regional markets in the country.
This growth has been driven by a combination of factors, including affordability, strong employment opportunities, and continued migration. While rental growth in some other regional markets has softened, Townsville remains a high-demand area for both tenants and investors.
Meanwhile, Perth has been one of the tightest rental markets in the country, and we’re still seeing rental increases there.
Despite an increase in listings and more properties coming to market, demand is holding strong. A big driver of this demand is overseas migration. Perth remains an attractive destination for people moving to Australia, and that’s keeping pressure on rental stock.
However, there are signs that rental growth in Perth is beginning to slow. The market isn’t as overheated as it was in 2022, and with more supply expected in the coming months, we may see rental price growth moderate further. That said, vacancy rates remain extremely low, so any slowdown in rental growth is likely to be gradual rather than a sharp decline.
Perhaps the most interesting rental market right now is Darwin.
Vacancy rates in Darwin have dropped significantly, and properties are now averaging 20 inquiries per listing. That’s a level of competition we haven’t seen since Perth’s market took off a few years ago.
The big difference, though, is that Darwin is still affordable compared to other capital cities. Investors can secure strong rental yields of 6–7%, which is where Perth was before its major growth phase.
Right now, you can still pick up good-quality properties in Darwin for $550K–$650K, making it one of the strongest rental markets in the country. The demand is there, the supply is tight, and the yields are far better than what you’d find in most other capital cities.
Despite the slowdown in rental growth, we’re not seeing major pullbacks in rents anywhere in the country.
There are certainly areas where the pace of growth has eased. Sydney, for example, has seen more rental stock come onto the market, and tenants now have slightly more options. But overall, vacancy rates remain historically low, and demand continues to outstrip supply in most cities.
Instead of prices falling, we’re seeing a shift in how competitive the rental market is. Instead of 15 applications per property, some areas are now seeing three or four. That’s still solid demand, just not the frenzy we saw in previous years.
For property investors, rental trends are one of the biggest indicators of future price growth. Historically, strong rental demand and rising rents precede capital growth as more investors enter a market in search of yield.
That’s why markets like Darwin and Melbourne are interesting right now.
In Darwin, rental demand is surging, and with limited supply, prices are likely to follow a similar trajectory to what we saw in Perth a few years ago.
In Melbourne, the combination of improved sentiment, rising yields, and returning investor activity is setting the stage for a stronger market.
While Perth is still strong, the market there is beginning to level out. The best opportunities may now lie in undervalued markets that are just beginning their growth cycle. Markets where rents are rising, vacancy rates are low, and prices haven’t yet caught up.