Australian renters continue to face intense market pressures as national rents accelerate in annual terms, despite a slight easing in quarterly momentum.
Cotality's Rental Review Q2 2026 shows rents moderating from the 2.1% increase recorded in March. lifted by 1.6% over the June quarter, However, the annual rate of growth accelerated to 5.9% in Q2, up from 5.7% in Q1.
This annual measure has steadily trended higher since hitting a cyclical low of 3.4% in mid2025, bringing the median national dwelling rent to $705 per week.
The cumulative effect of sustained increases means national rents have surged 40.6% over the past five years, adding an average of $204 per week to household rental commitments. In stark contrast, the previous fiveyear period (June 2016 to June 2021) saw median rents rise by just $55 per week, or 12.2%.
Cotality Australia’s Head of Research Gerard Burg said this rapid acceleration, running well ahead of household incomes, is driving severe rental affordability constraints.
"We are seeing a profound shift in affordability across the market. In March this year, the typical household was allocating roughly one-third of their gross income to rent, compared to around 27% just five years ago," Mr Burg said.
"While quarterly rental growth has eased slightly, the underlying supply deficit means conditions remain incredibly challenging for tenants.
“We are approaching a threshold where rental affordability acts as an increasing constraint on further growth, particularly in regional areas where lower median incomes mean households are spending upwards of 35% of their income on rent."
Severe listing deficits and low vacancy rates lock in market tightness
The primary driver for ongoing rental growth remains a severe lack of available stock across the country.
The national dwelling vacancy rate sat at 1.6% over the June quarter, unchanged from March and remaining below the five-year average of 1.8%.
Total rental listings at the end of June remained exceptionally weak by historical standards, sitting 16.7% below the five-year average.
- Darwin recorded the tightest conditions, with listings 26.1% below the long-term average
- Sydney followed closely with listings down 24.1%
- Melbourne recorded a listing deficit of 18.4%
Every capital city currently records a vacancy rate below 2.0%. Sydney and Brisbane recorded the highest vacancy rates at 1.9%, while Adelaide remains the tightest rental market in the country at a mere 1.0%.
"With vacancy rates compressed so tightly, tenants are left with very little leverage," Mr Burg said.
"Capital city rents rose faster than regional markets this quarter, reversing a trend of regional outperformance seen between late 2024 and early 2026, largely because regional markets are hitting severe affordability ceilings."
Inter-capital price gap narrows as houses outpace units
Sydney remains Australia's most expensive capital city with a median rent of $841 per week in June, but rapid rental growth in Perth ($784 per week) and Brisbane ($734 per week) has substantially narrowed the gap. Darwin, despite having the lowest home values of any mainland capital, recorded the fourth-highest median rent at $725 per week. Conversely, Melbourne remains the most affordable mainland capital at $641 per week - $200 a week cheaper than Sydney - followed by Hobart, which recorded the lowest overall capital city rent at $632 per week.
The June quarter also signalled a shift in property dynamics, with house rents outpacing unit growth.
Median house rents rose 1.7% over the quarter, compared to a 1.2% increase for units. This marks a significant slowdown for the unit sector, which had outpaced houses in the March quarter with a 2.5% increase.
"Over the longer term, unit rents have grown faster than houses, rising 46.3% over the past five years compared to 38.5% for houses," Mr Burg noted.
"This was largely driven by a post-pandemic recovery, particularly in Sydney and Melbourne.”
“However, the latest quarter shows diverging trends. Darwin led house rent growth at 4.1%, followed by Hobart at 3.1%, while Canberra recorded the softest house rent growth at 0.9%. For units, Darwin again led at 2.8%, while Sydney unit growth slowed significantly to just 0.9%."
Rental yields tick upward amid policy shifts and falling home values
Gross rental yields have gradually started to trend higher in recent months, reflecting sustained rental growth alongside falling national home values over the past quarter. The national dwelling yield moved up to 3.7% in June, an increase from approximately 3.5% at the end of 2025. Despite the uptick, gross yields remain subdued compared to longer-term pre-pandemic trends.
Yields remain highest in Darwin at 6.1%, though they have trended lower recently due to accelerating home values. Hobart (4.4%) and the ACT (4.2%) followed, with yields edging marginally higher over the quarter. More rapid home value declines in Sydney and Melbourne saw gross yields rise to 3.3% and 3.9%, respectively.
Mr Burg highlighted that despite these rising yields, the operating environment for investors remains complex following recent policy shifts.
"Given the changes to investor taxation policy in this year’s Federal Budget, most notably the removal of negative gearing for existing housing stock purchases from 1 July 2027, it is critical to note that gross yields remain well below the cost of capital," Mr Burg said.
"There are relatively few locations across Australia where a local investor could achieve a positively geared property under typical leverage rates.”
“Looking ahead, we expect gross rental yields to continue moving higher across major capitals over the near term, driven by deteriorating home value growth and sustained rental demand. However, with affordability boundaries stretched to their limits, the pace of rental growth in the coming quarters will increasingly be dictated by what tenants can realistically afford to pay."
