Rental growth re-accelerates amid tightest vacancy rate on record

Key takeaways

The median weekly rental value across Australia’s combined capital cities is now $702 per week.

By comparison, regional rents remain somewhat more affordable, holding below the $600 mark, with the typical regional dwelling renting for $591 per week.

Limited supply continues to be a major catalyst in rising rents, with the number of rental listings tracking approximately 25% below the previous five-year average nationally for this time of year.

Australia's rental market is seeing renewed strength as national vacancy rates reach a new record-low, according to Cotality's latest Quarterly Rental Review.

Cotality’s seasonally adjusted Rental Value Index saw national dwelling rents post a 1.4% rise in Q3, its largest three-month increase since June 2024, and a significant uptick from the 1.1% lift recorded in Q2.

This reacceleration was also apparent in the annual trend, with the 4.3% increase in rents seen over the 12 months to September up 90 basis points from the four-year low of 3.4% recorded over the year to May.

Brisbane and Sydney led the uptick in the pace of annual rental growth, up 1.7 and 1.5 percentage points respectively compared to June, while Adelaide was the only city to see growth ease, down 90 basis points.

This increased momentum in rental growth was being spurred on by a persistent shortage in rental supply, highlighted by the record-low vacancy rate seen nationally in September.

Ongoing scarcity in ‘for rent’ listings, coupled with continued strength in rental demand has pushed the national vacancy rate to a new record low of 1.47%— less than half the pre- COVID decade average of 3.3%.

Limited supply continues to be a major catalyst in rising rents, with the number of rental listings tracking approximately 25% below the previous five-year average nationally for this time of year.

Supply is particularly tight in the unit sector, especially in Sydney, which recorded both a new record low vacancy rate across its unit sector and broader dwelling rental market in September at 1.35% and 1.64% respectively.

While investors have comprised an elevated portion of home lending over the past two years, this hasn’t translated into additional available rental stock.

Capital city rents exceed $700 per week

The median weekly rental value across Australia’s combined capital cities surpassed the

$700 mark for the first time in August, before landing at $702 per week in September.

By comparison, regional rents remain somewhat more affordable, holding below the $600 mark, with the typical regional dwelling renting for $591 per week.

This gap has narrowed in recent years.

With the regions outperforming the capitals through the second half of 2024 and into 2025 the affordability advantage offered by regional rental markets has reduced from $123 in May 2024, to $111 in September.

Across the capitals, Sydney remains by far the most expensive rental capital, with the typical dwelling renting for $807 per week, while Hobart maintained its title as the country’s most affordable city to rent in, with a median weekly rental value of $584 per week.

Inflation and cash rate pressure

The recent uptick in rent growth is not only bad news for tenants, but it could also complicate the inflation and cash rate outlook.

The news that rents are once again rising at a higher rate will be unwelcome news for renters already struggling with the 43.8% or $204 per week increase in rents seen nationally over the past five years.

But it’s probably also unwanted news for homeowners and landlords servicing a mortgage.”

With “rents paid” a key component of the Consumer Price Index (CPI), the increased pace of rental value growth seen in recent months could push inflation higher.

Along with some renewed upwards pressure from the cost of new dwellings, this renewed momentum in rents may lead to inflation exceeding RBA forecasts, which could keep the cash rate elevated for longer.

About Kaitlin Ezzy Kaytlin is a skilled research analyst and key member within Cotality's (formerly CoreLogic) research team. She specialises in collating large and customised data sets, data visualisation and residential data reports. www.Corelogic.com.au