By Adam Hubbard October 8, 2026

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Australia’s Rental Market Has Hit an Affordability Ceiling; But the Shortage Isn’t Over

Property Market News
Australia’s Rental Market Has Hit an Affordability Ceiling; But the Shortage Isn’t Over

Key takeaways

Rental growth is stalling. Rents were unchanged across several capitals despite exceptionally tight vacancy rates.

Affordability is becoming the ceiling. Many tenants simply cannot absorb further significant rent increases.

Australia’s rental shortage remains severe. Brisbane, Adelaide and Perth have fewer rental properties available than a year ago.

Annual figures can be misleading. Much of the strong yearly rental growth reflects increases that occurred earlier in the year.

Investors should focus on long-term fundamentals. Quality properties in supply-constrained locations with strong owner-occupier demand remain best placed for long-term growth.

For the last few years, Australia's rental market has followed a fairly predictable pattern.

There haven't been enough rental properties available, vacancy rates have fallen to extraordinarily low levels and rents have risen as tenants competed for the limited stock on offer.

But something interesting is now happening.

The rental shortage remains, vacancy rates in many cities are still exceptionally tight and, in some markets, there are actually fewer rental properties available than there were a year ago.

Yet rents have stopped rising across much of the country.

According to Domain's September 2026 Rental Report, capital city house rents were unchanged over the September quarter; on the other hand, unit rents increased by 1.5% nationally.

Melbourne, Brisbane, Adelaide and Perth recorded no quarterly rental growth for either houses or units, while Sydney and Canberra actually experienced falls in house rents.

At first glance, that seems counterintuitive. Basic economics tells us that when supply remains scarce and demand remains strong, prices should continue rising.

However, there's another part of the equation that property investors need to understand.

Tenants eventually reach the limit of what they can afford.

The rental shortage hasn't disappeared

Perhaps the most revealing numbers in Domain's latest report come from Brisbane, Adelaide and Perth.

Brisbane's vacancy rate remained at just 0.7% in September, while rental listings were 3% lower than a year earlier.

Yet both house and unit rents were unchanged over the quarter. Brisbane house rents remain at a record $700 per week, while units are sitting at $660.

Table 1: House rents, quarterly and annual changes

HOUSES \| MEDIAN RENTAL ASKING PRICE
Capital City	Sept-26	Jun-26	Sep-25	Quarterly Change	Annual Change	Status
Sydney	$835	$840	$790	-0.6%	5.7%	$5 below Jun-26 record
Melbourne	$600	$600	$580	0.0%	3.4%	Record (steady)
Brisbane	$700	$700	$660	0.0%	6.1%	Record (steady)
Adelaide	$650	$650	$620	0.0%	4.8%	Record (steady)
Perth	$750	$750	$700	0.0%	7.1%	Record (steady)
Canberra	$700	$710	$690	-1.4%	1.4%	$10 below Jun-26 record
Darwin	$800	$760	$700	5.3%	14.3%	Record (new)
Hobart	$625	$625	$590	0.0%	5.9%	Record (steady)
Combined Capitals	$700	$700	$650	0.0%	7.7%	Record (steady)

The situation is even more striking in Adelaide.

Vacancies were just 0.4%, the second-lowest September result on record, while the number of rental listings fell by an extraordinary 22.8% over the year. Despite that severe shortage of available accommodation, house rents remained at $650 per week and unit rents at $550.

Table 2: Unit rents, quarterly and annual changes

UNITS \| MEDIAN RENTAL ASKING PRICE
Capital City	Sept-26	Jun-26	Sep-25	Quarterly Change	Annual Change	Status
Sydney	$780	$780	$750	-0.0%	4.0%	Record (steady)
Melbourne	$600	$600	$575	0.0%	4.3%	Record (steady)
Brisbane	$660	$660	$640	0.0%	3.1%	Record (steady)
Adelaide	$550	$550	$520	0.0%	5.8%	Record (steady)
Perth	$700	$700	$650	0.0%	7.7%	Record (steady)
Canberra	$580	$580	$560	0.0%	3.6%	Record (steady)
Darwin	$650	$648	$580	0.4%	12.1%	Record (new)
Hobart	$525	$520	$480	1.0%	9.4%	Record (new)
Combined Capitals	$690	$680	$650	1.5%	6.2%	Record (new)

Perth tells much the same story. Its vacancy rate was also 0.4%, rental listings declined 11.3% over the year, yet both house and unit rents remained unchanged during the September quarter.

Table 3: House and Unit combined rental vacancy rates

HOUSE AND UNIT COMBINED \| RENTAL VACANCY RATES
Capital City	Sep-26	Jun-26	Sep-25
Sydney	1.2%	1.1%	0.9%
Melbourne	1.4%	1.2%	1.4%
Brisbane	0.7%	0.6%	0.7%
Perth	0.4%	0.5%	0.5%
Adelaide	0.4%	0.5%	0.5%
Hobart	0.3%	0.4%	0.2%
Canberra	1.5%	1.2%	1.2%
Darwin	0.3%	0.1%	0.4%
Combined Capitals	1.0%	0.9%	0.9%
Combined Regionals	0.8%	0.8%	0.7%
National	1.0%	0.9%	0.9%

Domain Chief Residential Economist Dr Nicola Powell 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."

Dr Powell believes affordability is increasingly becoming the constraint on further rental growth.

As she explained, low supply has consistently pushed rents higher over the past few years, but the latest figures suggest affordability is now "beginning to act as a ceiling on rental growth, even while rental supply remains severely constrained."

There is a limit to what tenants can pay

Property investors sometimes make the mistake of assuming rents are determined primarily by their costs.

Interest rates rise, council rates increase, insurance premiums climb and maintenance becomes more expensive, so landlords understandably feel rents should rise to compensate.

Unfortunately, the rental market doesn't work that way.

Your tenant doesn't care about your mortgage repayments, and the market doesn't calculate your rent based on the return you want.

Rents are ultimately determined by what tenants are willing and able to pay in competition with other tenants.

Over recent years, tenants have absorbed substantial rental increases by spending a larger proportion of their income on housing, moving into smaller properties, sharing accommodation, moving back home or relocating to cheaper areas.

Eventually, however, there is nowhere further for some households to stretch.

And we may now be seeing evidence that parts of Australia's rental market are approaching that point.

Dr Powell put it well when she observed that Australia's rental shortage hasn't disappeared, but "it's no longer translating into higher rents everywhere."

She added that affordability is playing a greater role in rental outcomes, even where supply remains exceptionally tight.

Don't be fooled by the annual figures

There's another trap in the latest numbers.

Annual rental growth still looks relatively healthy in many cities.

Brisbane house rents, for example, remain 6.1% higher than a year ago, while Perth house rents are up 7.1% and Adelaide rents are also higher year-on-year.

But annual figures tell you where we've been rather than necessarily where we're heading.

Much of today's annual growth reflects increases that occurred earlier in the year.

Sydney provides a good example. House rents fell 0.6% during the September quarter to $835 per week, while unit rents remained unchanged at $780.

Domain notes that without the strong June-quarter increase, annual unit rental growth would effectively have been flat.

Note: Dr Powell cautions that while September is typically a softer seasonal period, growth stalled across most capitals despite continuing rental shortages.

That means we'll need to watch what happens over the next few months carefully.

If the normal seasonal uplift returns as we move towards summer, the September figures may prove to be partly seasonal.

If rents remain subdued despite persistently low vacancies, it would be stronger evidence that tenants have reached an affordability ceiling.

For mine, I can only see rents rising further.

What does this mean for property investors?

I wouldn't interpret these figures as suggesting Australia's rental crisis is over. Far from it.

The underlying supply problem remains deeply entrenched, and Domain warns that slowing investor activity could further constrain the delivery of rental supply.

At the same time, investors face higher borrowing costs and a changed investment environment, placing additional pressure on holding costs.

This creates an unusual situation where both sides of the rental market are under pressure.

Tenants are struggling to absorb further rent increases, while many landlords are dealing with rising ownership costs without being able to automatically pass those costs on through higher rents.

For strategic property investors, this reinforces something we've been saying at Metropole for decades: you should never build an investment strategy around rental growth alone.

Rental income is important, and cash flow matters enormously, particularly in today's higher interest rate environment.

But residential property investment has always been a long-term wealth creation strategy where capital growth ultimately does much of the heavy lifting.

That's why I would rather own an investment-grade property in a location with strong underlying owner-occupier demand, constrained supply, good incomes and long-term capital growth prospects than chase a superficially attractive rental yield in a location with weaker fundamentals.

The bigger picture

Australia still doesn't have enough housing, and we certainly don't have enough rental accommodation in many of our major cities.

At the same time, there is only so much households can spend on housing before they begin making difficult compromises elsewhere.

That's why I suspect the next phase of the rental market will be more fragmented than the last one.

Some cities, suburbs and property types will continue experiencing rental growth, while others may remain relatively flat as affordability becomes a stronger constraint.

Domain describes the outlook as a rental market moving at "multiple speeds", and that seems a sensible way to think about what lies ahead.

For investors, the lesson is to avoid extrapolating the extraordinary rental growth of recent years indefinitely into the future. Markets don't move in straight lines, and neither do rents.

Yet the long-term fundamentals supporting well-located Australian residential property remain compelling. We have a growing population, a chronic shortage of housing in many desirable locations and significant barriers to delivering enough new dwellings.

The rental market may be reaching the limits of what tenants can currently afford, but the structural shortage of housing remains unresolved.

And over the long term, scarcity in the right locations will continue to matter enormously.

About Adam Hubbard Adam Hubbard is a senior Wealth Strategist at Metropole and his many years of real estate and wealth creation experience gives him a holistic perspective with which he helps his clients safely grow their wealth through property.