Key takeaways
Rents are still rising across most capitals, even though vacancy rates eased a little over June.
Sydney and Melbourne remain under real rental pressure, particularly in the unit market.
Australia’s labour market remains strong, with unemployment lower at 4.4% in May.
Auction markets are subdued as school holidays, higher interest rates and weaker confidence weigh on buyer activity.
For property investors, the mixed data points to a market where careful asset selection matters more than ever.
Rental vacancy rates eased slightly over June, but rents kept climbing in almost every capital city, with Sydney and Melbourne leading the charge.
Sydney house rents are now up 9.4% over the year, the strongest annual growth of any capital, while Melbourne unit rents jumped 6.8% in June alone.
New federal and state taxes designed to push investors out of the market are likely to make the rental shortage worse rather than better.
At the same time, the jobs market remains resilient, with unemployment at 4.4% in May, jobs up by 40,000 over the month and the participation rate still high at 66.7%.
However, auction markets are sending a different message, with clearance rates subdued across the capitals as school holidays begin and buyers remain cautious after this year’s interest rate rises.
Every week I sit down with Dr Andrew Wilson from My Housing Market for our Property Insiders chat, and this week's numbers gave us plenty to talk about, so watch this week's Property Insiders chat, then keep reading for my take on what it all means for you as an investor.
Rents are still rising, even as vacancy rates ease
Watch this week’s Property Insider chat as Dr Andrew Wilson explains that while vacancy rates eased over June, rents continued to rise for both houses and units, particularly in Sydney and Melbourne.
That is an important distinction, because some people will look at slightly higher vacancy rates and assume the pressure is coming off tenants. I don’t think that is the right interpretation.
Winter is typically a quieter time for rental demand, with fewer people moving house and less urgency in the market.
Yet despite that seasonal easing, rents are still rising in most capital cities, which tells us that the underlying shortage of rental accommodation has not gone away.
And it’s much the same for our apartment markets.
That monthly jump in unit rents reflects the pressure building in the inner and middle-ring rental markets where many students, migrants and younger households are looking for accommodation.
In my mind, these figures confirm what we have been saying for some time… Australia does not have a rent problem in isolation. We have a rental supply problem.
Rents rise when there are too few properties available relative to the number of people who need somewhere to live.
Of course, tenants are feeling the pain, and I have sympathy for households facing higher rents at a time when the cost of living is already stretching budgets.
But the uncomfortable policy reality is that tenants need more rental properties, and in Australia, most of those rental properties are supplied by everyday private investors.
That is why I remain concerned about both Federal and State government policies that make property investment less attractive or more costly.
The new taxation policies designed to significantly reduce investor numbers are likely to make an already tight rental market worse by reducing the supply of rental properties.
A better response would be to increase supply, speed up planning approvals, encourage the right type of medium-density housing in established suburbs, support build-to-rent where it is viable, and stop treating private investors as the enemy.
And even if governments announced better housing policies tomorrow (which they won’t), it would take years for meaningful new supply to reach the market, meaning low vacancy rates and rising rents are likely to remain part of the landscape for some time yet.
The labour market remains stronger than many expected
Watch this week’s Property Insiders chat, as Andrew unpacks the latest labour market figures, which remain stronger than many people expected given the impact of higher interest rates.
- Also read:Rents Keep Rising While Auction Markets Cool – What It Means for Property Investors | Property Insiders
- Also read:National Property Listings Ease in June While Annual Supply Continues to Strengthen | Latest SQM Listing Data
- Also read:Latest Property Price Forecasts. Australian Property Market Outlook 2026-2027: Navigating a Market Correction
- Also read:National Weekly Auction Report – July 4th 2026 | Auction Markets Remain Subdued as School Holidays Commence
- Also read:Falling Home Prices Accelerate Over June | Latest stats from Dr. Andrew Wilson
The May unemployment rate was lower at 4.4%, with jobs up by 40,000 over the month and the number of unemployed down by 18,000.
The participation rate remained steady at a historically high 66.7%, indicating that a large share of Australians are still either working or actively looking for work.
Queensland recorded the lowest jobless rate at 3.7%, while NSW sat at 4.3%, Victoria at 4.9%, South Australia at 4.2% and Western Australia at 4.6%.
A strong labour market is important for property. People who feel secure in their employment are more likely to rent, buy, upgrade, invest and form households.
But there is another side to this - a resilient jobs market also gives the Reserve Bank more room to keep monetary policy tighter for longer if inflation remains sticky.
That is why we need to watch the labour market carefully over the second half of the year.
Dr Wilson notes that higher rates are likely to impact the labour market, and I agree that the full effects of this year’s interest rate rises have not yet flowed through the economy.
Property markets tend to respond to confidence as much as borrowing capacity.
When households are worried about further rate rises, higher repayments or weaker employment conditions, they tend to delay those decisions.
Auction markets remain subdued as school holidays begin
While rents are telling us that supply remains tight, auction markets are telling us that buyer confidence remains cautious.
Capital city auction markets continued to report subdued clearance rates in the first week of July, with school holidays now underway in all states.
That seasonal factor matters, because winter and school holidays often reduce the number of active buyers and sellers.
However, this year’s softer auction results are also being affected by higher interest rates, weaker sentiment and significant changes to property taxes.
Remember…Sydney and Melbourne auction results tend to give us a better read on buyer sentiment than Brisbane or Adelaide, where private treaty sales play a larger role.
Even so, the overall trend is clear, buyers are more cautious, vendors are having to meet the market, and the urgency that was present in stronger auction periods has cooled.
What this means for property investors
For investors, the message is clear - the rental market remains undersupplied, but the sales market is more selective.
That creates both risks and opportunities.
The risk is that some investors will buy the wrong asset simply because they are attracted to a high yield or a lower asking price.
The opportunity is that well-funded, strategic investors may find themselves facing less competition from emotional buyers and more motivated vendors over winter.
The investors who do well in the next stage of the cycle will be those who have a strategic plan, understand their cash flow, buy the right assets and avoid being distracted by short-term noise.
If you'd like to talk through what all this means for your own portfolio, particularly with rents still climbing and auction markets cooling in different ways across the country, the team at Metropole would be happy to help. Click here now to have a wealth discovery chat with one of our wealth strategists.
