The national median rent price has ended its long run of straight growth, dropping half a per cent amidst ongoing COVID-19 uncertainty.
The June quarter rent drop from CoreLogic figures is the largest quarterly drop since September 2018.
City rental prices were hit harder than the regions, dropping by 0.7, compared to 0.2 in the country areas.
Melbourne is the fourth-most expensive capital for median rent price in the country, behind Sydney, Canberra and Hobart.
Head of research at CoreLogic, Eliza Owen, said the COVID restrictions were reducing the number of people hunting after a place to rent.
"Closed international boarders created a significant shock to rental demand, as historically the majority of new migrants to Australia have been renters," she told Nine News.
"Furthermore, job losses in sectors such as hospitality, tourism and the arts, which ABS payroll data estimates has been around 20 per cent, have also impacted demand, because households in these sectors are more likely to rent than in other industries."
CoreLogic researchers pointed out in their report that one small bonus for landlords at the same time as falling rents was the ability to better negotiate a saving on their mortgages.
"One positive for landlords is that mortgage rates are settling to a new record low, as the RBA set the cash rate to an effective lower bound of 0.25 per cent in late March," the report says.
"The cash rate is expected to stay at this record low for years to come, until the unemployment rate reflects full employment, and inflation is comfortably within a 2-3 per cent target band.
"As a result, average new mortgage rates reported by the RBA hit a new record low in May, at 3.15 per cent."