Capital city rents stall as tenants reach an affordability ceiling

Australia’s rental shortage has not disappeared, but the latest figures suggest tenants are increasingly unable to fund another round of large rent rises.

Domain’s September-quarter Rental Report found the combined capital city median asking rent for houses remained unchanged at $700 a week. Unit rents rose 1.5 per cent to $690, a much slower result than the rapid increases renters have faced over recent years.

The pause is notable because rental properties remain difficult to find. The ABC reported that the national vacancy rate had edged up by 0.1 percentage points to 1 per cent, which is still a very tight market by historical standards.

Normally, low vacancies give landlords greater scope to lift asking rents. Domain’s figures show that relationship weakening in several cities, pointing to an affordability ceiling rather than a sudden improvement in supply.

Sydney and Canberra record falls

Sydney house rents declined by $5, or 0.6 per cent, to a median of $835 a week. It was the city’s first quarterly fall since December 2024.

Sydney unit rents remained at a record $780 a week, while the city’s vacancy rate rose to 1.2 per cent. Domain said that was Sydney’s highest September vacancy result since 2021.

Canberra recorded the other fall in capital city house rents, dropping $10 over the quarter. Melbourne, Brisbane, Adelaide and Perth recorded no quarterly movement across either houses or units.

Darwin and Hobart were the main exceptions to the broader slowdown. Darwin house rents rose 5.3 per cent during the quarter, while Hobart house rents increased 1 per cent. Hobart unit rents also rose, as did rents for both dwelling types in Darwin.

The varied results reinforce that Australia does not have a single rental market. A renter’s negotiating position still depends heavily on the city, suburb, dwelling type and price bracket.

Record prices remain the starting point

Flat rents do not mean renting has become cheap. Most capital city medians remain at or near records after years of growth.

Brisbane house rents held at $700 a week and unit rents at $660. Its vacancy rate remained at 0.7 per cent, while rental listings were 3 per cent lower than a year earlier. That combination — fewer available properties but no quarterly rent rise — is a strong indication that tenants’ budgets are restricting what the market can absorb.

Melbourne’s median rent was $600 for both houses and units. Perth houses remained at $700 and units at $700, while Adelaide houses held at $625 and units at $550.

Annual growth also remains positive because of increases recorded earlier in the year. Across the combined capitals, house rents were 7.7 per cent higher than a year ago and unit rents were up 6.2 per cent.

For tenants, this means the September result is better described as a pause than a reversal. A flat median does not guarantee that an individual lease renewal will be unchanged, particularly in affordable outer suburbs where demand can remain intense.

Renters are changing how they live

Independent property economist Cameron Kusher told the ABC that renters were responding by accepting less convenient locations, sharing homes or staying with family for longer.

Domain’s report similarly found that more affordable areas could continue to record increases even when citywide medians were flat. Tenants priced out of inner and middle suburbs can transfer competition to cheaper locations rather than leave the market altogether.

The December quarter will be an important test. Rental demand often strengthens from October into summer as people change jobs, begin study or move between leases. Domain said failure to record the usual seasonal increase would be stronger evidence that affordability constraints are setting a harder limit on rent growth.

Landlords also face higher borrowing and holding costs, but the report suggests those costs cannot automatically be passed through. The maximum achievable rent remains determined by what competing tenants can pay, not simply by an owner’s mortgage repayment.

What it means for you

• Renters may have more room to compare properties or negotiate in Sydney and Canberra, but vacancy rates remain tight.
• Check suburb-level conditions rather than relying only on capital city medians, especially in lower-cost outer areas.
• Landlords should test the market carefully because an ambitious increase may lead to a longer vacancy.
• Buyers assessing an investment should base their calculations on realistic current rent, not assume recent growth rates will continue.