Rental market finally gives tenants a break as rent growth stalls
Vacancy rates are improving and rental growth has stalled across several capitals, offering tenants some relief after years of rapidly rising rents and exceptionally tight supply.
For the first time in years, renters finally have cause to see a glimpse of light as the market emerges from a long tunnel.
Vacancy rates around the country are improving and the rent hikes that have been the constant bane of renters have at last stabilised.
Capital city rent growth has stalled despite severe - but improving - rental shortages, with house rents holding at $700 a week and unit rents rising $10, while Brisbane, Adelaide, Perth and Melbourne recorded flat rents and Sydney and Canberra saw house rents fall by $5 and $10 respectively, according to Domain.
The national median dwelling rent reached $713 per week in September, according to Cotality.
According to Cotality data released Friday (9 October), vacancy rates have loosened from the exceptionally tight levels earlier this year. The national vacancy rate increased to 2.1 per cent from 1.7 per cent, with Hobart and Sydney recording the highest rates at 3.1 per cent and 2.5 per cent. Adelaide remained the tightest capital at 1.4 per cent.
The vacancy rate improvement will come as a huge relief to the federal government, which introduced a range of policies aimed at shifting property demand towards renters and first home buyers at the expense of property investors.
Many industry observers have argued strenuously that the negative gearing and capital gains tax discount measures that have deterred investors would lead to a crushing shortfall in rental supply.
The latest figures suggest those doomsday scenarios are not panning out.
The best news was reserved for Sydney renters, according to Domain, where house rents recorded their first quarterly decline since December 2024, falling 0.6 per cent ($5) to $835 a week. Canberra house rents fell 1.4 per cent ($10) to $700 a week, reversing gains recorded in the June quarter.
Brisbane, Adelaide and Perth all recorded flat rents despite some of the lowest vacancy rates in the country and fewer rental properties available than a year ago, challenging the long-held relationship between tight rental supply and rental growth. Melbourne also recorded stable rents across both houses and units.
Dr Nicola Powell, Domain’s Chief Residential Economist, said it was surprising to see rents stall in some of Australia's tightest rental markets.
“Brisbane, Adelaide and Perth all have fewer rental properties available than a year ago, vacancy rates remain exceptionally low, yet asking rents were unchanged.
“For the past few years, low supply has consistently pushed rents higher. This quarter suggests affordability is beginning to act as a ceiling on rental growth, even while rental supply remains severely constrained.
She said that while the September quarter is typically a softer seasonal period for rental markets, growth stalled across most capitals despite ongoing rental shortages.
“Australia’s rental shortage hasn’t disappeared, but it's no longer translating into higher rents everywhere. Affordability is playing a greater role in determining rental outcomes, even where supply remains exceptionally tight.”
Cotality’s Quarterly Rental Review attributed the easing in rental conditions to changes in demand-side factors.
“Net overseas migration has moderated since its peak in the March quarter of 2023, while rental household formation appears to be adjusting to affordability pressures through larger average household sizes, with group and multi-generational households becoming more common,” the report noted.
The flight from the cities has seen regional markets regain the lead in rental growth, with rents rising by 0.8 per cent over the quarter compared with 0.4 per cent across the combined capitals. This reverses the pattern seen in the March and June quarters, when capital - city growth was marginally stronger.
Domain’s September 2026 Rental Report concluded that the outlook remains delicately balanced.
“Slowing investor activity is expected to constrain the delivery of additional supply, reinforcing existing shortages.
“At the same time, higher borrowing costs and adjustments to housing investment policy will place greater pressure on investors to offset rising holding costs and weaker capital growth expectations.
“As the latest results indicate, capital city markets are entering a more measured phase of growth, with landlords likely to continue cautiously testing pricing, while both demand and supply face challenging conditions and an uncertain outlook.”
Signs are emerging that renters are responding to the new property landscape, where prices have retreated for six successive months, by moving towards how ownership.
New research using ABS Lending Indicators data reveals that, for the first time in two years, first home buyer lending grew faster than the rest of the market over the past 12 months.
More than 100,000 first home buyers have used the expanded 5% Deposit Scheme in its first year, according to new figures from Housing Australia.
The Federal Government expanded the scheme to all first home buyers on 1 October 2025. It removed income caps, uncapped the number of places, and lifted property price limits. The scheme lets eligible first home buyers purchase with a deposit of as little as 5 per cent of the purchase price.
Nationally, 102,594 first home buyers have used the scheme since it was expanded.
