Australia’s rental market is entering a new phase as renters increasingly reach the limit of what they can afford, with growth slowing and becoming more uneven across the country, according to Domain’s December Quarter Rent Report.
The report shows that after several years of sharp rental increases, growth across the combined capital cities has moderated.
House rents rose just 2.3 per cent, or $15, over the December quarter, signalling a clear slowdown from the rapid gains recorded earlier in the cycle.
While rents remain elevated and competition for rental properties is still strong, the report shows conditions are no longer moving in a single direction.
Instead, rent changes are increasingly dependent on location and dwelling type, with some cities recording renewed growth, others stalling, and several showing clear signs of affordability constraints.
“This marks a new phase for the rental market,” the report states, noting that rents are still high but increases are now slower and more selective, rather than broad-based.
Brisbane stands out as the only capital city where rent growth is clearly reaccelerating.
House rents rose 3.1 per cent to $670 per week in the December quarter, the largest increase of any capital city, supported by persistently tight supply.
By contrast, Perth and Adelaide have shifted into clearer cooling phases after years of double-digit growth.
Perth house rents were unchanged for the December quarter, marking the longest stretch of stability in six years, while Adelaide rents were flat for a second consecutive quarter.
Despite this pause, rents in both cities remain at record highs.
Across the combined capitals, house rents rose 2.3 per cent over the quarter, the first increase in a year.
Adelaide, Perth and Darwin recorded no quarterly change, while Melbourne remains the only capital city where house rents are lower than a year ago.
The report also highlights a growing divergence between houses and units, as renters increasingly prioritise affordability.
Units are now recording stronger rent growth than houses in Melbourne, Brisbane, Adelaide, Canberra and Darwin, narrowing the price gap between dwelling types to historically low levels in several cities, including Perth and Brisbane.
Vacancy rates have lifted slightly due to seasonal factors but remain extremely tight.
All capital cities recorded vacancy rates below 1.7 per cent, reinforcing that demand continues to outweigh supply across the rental market.
“Australia’s rental market is reaching the point where renters simply can’t afford to pay much more, even though competition remains strong,” said Domain’s Chief of Research and Economics, Dr Nicola Powell.
“Rents are still at record highs, but household budgets are under pressure. In many areas, renters now need an income of more than $100,000 to rent comfortably.
“The market is no longer moving in one direction. Rent changes now depend heavily on where you live and whether you’re renting a house or a unit.
“Conditions still favour landlord’s, with very low vacancy rates across all capital cities. However, increased investor activity and ongoing support for first-home buyers could help ease the shortage of rental homes over time, with the market starting to rebalance in 2026.”
Domain said the next phase of the rental market is likely to be defined by high rent levels, slower and more selective growth, and increasing divergence between cities and dwelling types, rather than a return to the rapid increases seen in previous years.
