Australia’s rental market could finally be taking a turn after years of housing shortages and surging prices.

New figures showed capital city asking rents recorded the largest monthly rental falls since the outbreak of Covid, with Sydney leading the declines across the five biggest cities.

The average decline in rents for all capital city dwelling types was 0.5 per cent over July, but the fall across Greater Sydney was double that at 1 per cent.

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House rents in Sydney saw even bigger falls, dropping by an average of 1.4 per cent, while unit rents fell by 0.6 per cent, according to the data from SQM Research.

The rental market could be taking a turn as asking rents recorded have fallen. Picture: NCA NewsWire / Ian Currie

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

A typical Sydney rental now costs about $803 per week.

All up, five capital cities recorded falls in market rents with Hobart falling the most by 1.6 per cent.

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SQM Research director Louis Christopher said the rent falls may appear minor compared to the extreme rises recorded over the past two years, but they were the biggest seen since 2020.

“For the past 30 days, SQM Research has recorded the largest decline in capital city rents since the days of 2020 when Covid first hit the country,” he said.

“This will be somewhat welcoming to tenants and as a research house, we do believe the market rental rises of 10 to 20 per cent annum are now over.”

Tenants could soon be due some relief. Picture: Tim Hunter.

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Mr Christopher noted that massive rent rises may be subsiding but the rental crisis was still ongoing.

“The falls were broad based, with the larger falls recorded in our larger capital cities and regional coastal locations.

“It should be noted of course that rents are still very high and this retracement is minor compared to the massive rise in rents recorded around the country since 2021.”

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SQM revealed that rent falls tended to be the highest within inner city and coastal regions.

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

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

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Sydney’s CBD and surrounds had a vacancy rate of 5.5 per cent – the highest in the greater metropolitan area – while the eastern suburbs vacancy rate was 2.8 per cent.

For context, a 3 per cent vacancy rate normally indicates a market where tenant demand and property supply are evenly matched.

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The higher availability of rentals within inner areas was a contrast to the low vacancy rates within middle-ring and outer-ring areas.

Some of these regions had less than 1 per cent rental stock available, signalling extreme rental shortages.

CoreLogic economist Kaitlyn Ezzy said the slowdown in rental increases could be partly the result of more tenants becoming first-home buyers.

“The high cost of renting (is) likely to be motivating more people with the financial means to service mortgage repayment and job security, to buy their first home, and we’re also seeing investors take notice too,” Ms Ezzy said.