After years of housing shortages and rising prices, the Australian rental market may finally be turning around.

New figures show that rents in capital cities have seen their biggest monthly declines since the Covid-19 pandemic struck, with Sydney seeing the most declines among the top five cities.

The average decline in rents for all types of housing in capital cities was 0.5 percent in July, but in Greater Sydney the decline was twice as high at 1 percent.

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According to data from SQM Research, house rents in Sydney saw even greater declines, by an average of 1.4 percent. Rents for apartments, on the other hand, fell by 0.6 percent.

The rental market could see a turnaround as rents have fallen. Image: NCA NewsWire / Ian Currie

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This coincided with an increase in available rental housing, with particularly large increases in rental supply in Sydney’s inner city and eastern suburbs.

A typical rent in Sydney currently costs around $803 per week.

Overall, five capital cities recorded declines in market rents, with Hobart recording the largest decline at 1.6 percent.

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According to Louis Christopher, head of research at SQM, the rent declines may seem small compared to the extreme increases of the past two years, but they are the largest since 2020.

“Over the past 30 days, SQM Research has recorded the biggest fall in rents in capital cities since 2020, when Covid first hit the country,” he said.

“This will be quite inviting for tenants and as a research institute we believe that the annual rent increases of 10 to 20 percent are now over.”

Tenants could soon be entitled to some relief. Image: Tim Hunter.

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Mr Christopher noted that although massive rent increases were easing, the rental crisis was still ongoing.

“The declines were broad-based, with the largest declines in our larger capital cities and regional coastal towns.

“Of course, you have to remember that rents are still very high and this decline is small compared to the massive increase in rents seen across the country since 2021.”

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SQM found that rent declines tended to be most pronounced in inner cities and coastal regions.

These areas tended to have higher vacancy rates – a measure of the total amount of rental housing in the area that is currently listed as available.

The city center had the highest vacancy rates. Image: NCA NewsWire / Max Mason-Hubers

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In Sydney’s CBD and surrounding areas, the vacancy rate was 5.5 percent – ​​the highest in the metropolitan area – while the vacancy rate in the eastern suburbs was 2.8 percent.

For comparison, a vacancy rate of 3 percent usually indicates a market in which tenant demand and property supply are balanced.

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The higher rental supply in the inner districts contrasts with the low vacancy rates in the central and outer ring areas.

In some of these regions, less than 1 percent of the rental housing stock was available, indicating an extreme shortage of rental housing.

The slowdown in rent increases could be due in part to more renters buying homes for the first time, according to Kaitlyn Ezzy, an economist at CoreLogic.

“The high cost of rent is likely to motivate more people who have the financial means to pay off their mortgage and job security to buy their first home. And we are also seeing investors taking notice,” Ms Ezzy said.