New data reveals Canberra is the only city in Australia to have a decline in rental rates as increases continue nationally.
CoreLogic's latest quarterly rental review for 2022 showed a slowdown in the pace of rental growth across the country to 2 per cent in the December quarter.
This was down from the September quarter of 2.3 per cent growth and the peak growth rate of 3 per cent in the three months to May.
CoreLogic head of research and report author Eliza Owen said this is possibly due to a seasonal lift in rental stock combined with affordability constraints.
"The decline in quarterly rental growth rates observed in the December quarter was led by the capital cities where rents continued to increase but at a slightly slower rate than they have done in September and June quarters," she said.
"While a slowdown in the pace of rent rises could be a sign that the rental market is starting to shift, it's not great news for tenants just yet. Rents are still rising in most capital cities and regional areas with vacancy rates low."
The rent values in Canberra have fallen to a cumulative -1.1 per cent since peaking in June, however the city has maintained its position as Australia's most expensive capital.
This follows a trough-to-peak upswing of 18.1% from September 2020.
The median weekly rental value for Canberra is $681, only $2 more expensive than Sydney at $679 per week followed by Darwin at $594 per week.
Ms Owen predicted population dynamics may be creating some variation in performance across capital city rental markets, as ABS population data showed a weakening internal migration trend across Canberra. while Sydney and Melbourne had a strong return in net overseas migration.
"Unlike Canberra, high levels of net overseas migration to NSW and Victoria has vastly offset negative net internal migration flows in the year to June 2022," Ms Owen said.
"Prior to the pandemic, Sydney and Melbourne alone accounted for around two thirds of net overseas arrivals, with high density city centres being among the most popular destinations. This has likely contributed to unprecedented annual growth in unit rents over 2022, which was 15.5% across Sydney and 14.2% in Melbourne."
Since the start of the upswing in September 2020, Australian rent values have lifted 22.2 per cent, marking the largest rental upswing on record.
As for what's to come for 2023, Ms owen said the rental market outlook is mixed due to demand from international visitors during a time of weak confidence among property investors.
"On the one hand, returning overseas migration is likely to place continued demand on rental markets popular with overseas arrivals. Historic migration data suggests this would be Inner Melbourne, the South East of Melbourne, the West suburbs of Melbourne and Sydney's Inner South West," she said.
"On the flip side investor activity, and therefore rental supply, is not expected to pick up substantially in the year ahead. Even though rent yields are rising, investors are facing higher interest costs, and reduced capital growth prospects."
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