- Australian rents jumped in the first quarter of 2026 after modest growth in 2025
- Two new reports into the rental market have found rents in some markets have hit affordability constaints
- Melbourne has been named Australia's most affordable capital city for renters
Australia's rental vacancy rate fell to a record low of 0.7% during the March quarter, according to Domain's latest rental market report.
But it found continuing tight conditions are not translating into broad-based rental growth with some capital city markets hitting affordability constraints.
The report found growth remained uneven in the March quarter with some markets seeing a rebound while others remained flat despite tightening supply.
Perth still running hot
Perth remains the standout with both house and unit rents rising after a period of stability.
Other high-growth markets of Brisbane and Adelaide have seen rental increases moderate, driven by a slowdown in Brisbane house rents and uneven growth in Adelaide.
Rents have held steady at peak levels in Sydney while Melbourne is in a recovery phase although growth is not consistent.
Domain said rents remaining flat in some markets, even as vacancy rates dropped, was "a clear signal" that affordability is limiting the flow-through to further rental increases.
"This is most evident in markets where rents have already risen sharply, and capacity to absorb further increases in limited," the report said.
2026 sees rents jump
The report largely echoes the findings of realestate.com.au's new rental report which found median advertised capital city rents rose 4.6% over the March quarter to $680 a week - a jump of $30 a week from the previous quarter.
It follows a slower national growth period through 2025 although some cities recorded increases during that time.
The REA report found growth was fairly consistent across the capital cities with Perth, Darwin, and Hobart seeing the strongest increases annually (+7-8%) while Melbourne and Canberra recorded the slowest (+2-3%).
Unit rents also rose faster than house rents over the quarter.
The realestate.com.au analysis also noted strained rental affordability had slowed the pace of rent increases.
The report named Melbourne as "by far, Australia's most affordable state for renters", with the city recording lower rents relative to the rest of the country and higher average income.
Rental growth to slow
The Domain report also ventured a forecast for what's ahead for 2026.
Domain's analysis sees the next phase defined by affordability limits where low supply continues to support rental levels but no longer drives widespread price acceleration.
The REA report also agreed the "more modest pace of [national] rent growth recorded over the past 12 months [would] continue throughout the rest of this year".
However, it also remains to be seen how floated changes to investment property tax benefits in the May federal Budget could flow through to the rental market.
There's speculation the federal government may cut the capital gains tax discount on investment properties from 50% to between 25-33% while negative gearing tax benefits could be limited to one to two properties per landlord.
It's not clear, however, whether the changes would be applied retrospectively or to future investment property owners.
Depending on the changes and when they take effect, it could see some landlords choose to leave the rental market.
This could further tighten supply of rental properties but also provide more housing stock for renters looking to become homebuyers.
The federal Budget is due to be handed down on 12 May.
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