Australia’s rental market is entering a new phase as affordability limits bite, according to Domain’s Rental Report – December 2025 and State Of The Market quarterly analysis. After years of rapid increases, capital city rents remain near record highs and competition for properties is still intense, but the capacity to push prices much higher is clearly weakening.
That picture is echoed in separate figures from SQM Research, which show Australia’s national residential vacancy rate rose to 1.4% in December 2025, up from 1.3% in November, with 43,850 vacant rental dwellings. Even after this seasonal lift, vacancies remain below long‑term averages, underscoring how tight conditions remain.
Domain’s analysis shows that, rather than cooling uniformly at a national level, rental conditions are fragmenting.
Growth is persisting in some markets, reaccelerating in others, and slowing or stabilising elsewhere, increasingly shaped by local supply, demand, and price sensitivity. Broad‑based momentum has faded and rental growth is now more selective by city and dwelling type.
Brisbane stands out on the upside, with rent growth reaccelerating for both houses and units as tight supply supports higher prices. In contrast, Perth and Adelaide are clearly cooling at very elevated levels, with multiple quarters of flat rents pointing to emerging affordability ceilings.
Vacancy rates have edged higher with the usual year‑end changeover but remain very tight in most capitals. Hobart is still the most competitive market, with Perth and Adelaide also extremely constrained.
Domain attributes slower rent growth primarily to renters’ reduced capacity to absorb further increases, rather than any broad easing in demand or rental conditions.
The next phase is expected to feature high rent levels, slower and more selective growth, and greater divergence between cities and dwelling types, rather than a return to the rapid, broad‑based increases seen earlier in the cycle.
In Sydney, house rents reached a record $800 per week in the December quarter, rising 1.3% ($10). Quarterly growth has held at 1.3% for three consecutive quarters, the longest uninterrupted run of increases since 2023. This has pushed annual growth to 3.9% ($30), a 15‑month high, but still well below the double‑digit surges of 2022–24, highlighting how affordability is capping further acceleration.
Sydney unit rents held at a record $750 per week over the December quarter, the first quarterly pause in a year. Annual growth remains firm at 7.1% ($50), showing that demand is concentrated in the unit market. The price gap between houses and units is just 6.7% ($50), reinforcing renters’ preference for units as a more affordable option.
Sydney’s vacancy rate rose to 1.4% in December, from 0.9% in November, but is still below 1.7% a year earlier, making this the most competitive start of the changeover period in two years.
In Melbourne, house and unit rents are now level at $580 per week. House rents held at this level in the December quarter, stabilising after earlier declines. Annual house rents are down 1.7% ($10), and 2025 delivered the weakest calendar‑year growth on record, leaving Melbourne the cheapest capital city to rent a house.
By contrast, unit rents increased to a new record of $580 per week, rising 0.9% ($5) in the quarter. Annual unit growth has rebounded to 5.5% ($30) as tenants increasingly prioritise affordability. Melbourne’s vacancy rate rose to 1.6% in December, a 2025 high, but remains below a year earlier and is the lowest December vacancy since 2023.
Brisbane remains one of the strongest markets. House rents climbed to a record $670 per week in the December quarter, up 3.1% ($20), while unit rents rose to $650 per week, up 3.2% ($20). Annual unit growth has accelerated to 8.3% ($50), the highest in 15 months, narrowing the house–unit gap to 3.1% ($20). The vacancy rate edged up to 0.9% in December, an almost one‑year high, but is still the lowest December reading since 2023.
In Adelaide, house rents stayed at a record $620 per week for a second consecutive quarter. Annual growth has slowed to 3.3% ($20), the weakest in 5.5 years, pointing to a structural adjustment rather than a brief pause. Units continue to outperform, with rents at a record $525 per week, although annual unit growth has eased to 7.1% ($35). The vacancy rate increased to 0.6% in December, a five‑month high, but remains low.
Perth is on a clear high plateau. House rents held steady for a second consecutive quarter at a record $700 per week, while unit rents were unchanged for a third quarter at $650 per week. Annual growth for both has slowed to mid‑single‑digit rates, the weakest in around 5.5 years, suggesting tenants are hitting an affordability wall even as vacancy remains extremely low at 0.5%.
Hobart’s house rents rose for the sixth consecutive quarter to a record $600 per week, up 1.7% ($10), although momentum is fading. Unit rents fell 1.0% ($5) to $480 per week, the first quarterly decline in 2.5 years, but annual unit growth is still 4.3% ($20). With vacancy at just 0.3% in December, Hobart remains the country’s most competitive rental market.
In Canberra, house rents increased to $700 per week in the December quarter, up 1.4% ($10) after two quarters of no growth, with annual growth at 2.9% ($20). Unit rents rose to a record $580 per week, up 3.6% ($20), the strongest quarterly unit increase in more than four years and lifting annual growth to 3.6% ($20). The vacancy rate is 1.5%, the highest monthly figure in a year but the lowest December reading since 2021.
In Darwin, house rents held at $700 per week, with annual growth slowing to 2.9% ($20). Unit rents increased 3.0% ($18) over the quarter to $598 per week, pushing annual growth to 8.6% ($48), the fastest in more than three years. Vacancy rose to 0.7% in December but is nearly half the level seen a year ago, keeping Darwin firmly in landlord territory.
Across the capitals, the outlook for 2026 is clear: rents are likely to stay high and conditions tight, but with affordability now in the driver’s seat, growth will be slower, more selective and increasingly shaped by dwelling type and city‑by‑city dynamics, Domain reported.
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