Australia’s rental market continued to cool in the June 2025 quarter, but affordability pressures remain acute as rent hikes outpace wage growth, according to new data from Cotality.
Recent figures from SQM Research show a slight easing in national rental conditions, with the vacancy rate edging up from 1.2% to 1.3% in June. While Sydney (1.5%) and Melbourne (1.8%) recorded minor increases, most other capitals – including Brisbane, Perth, Adelaide, Darwin, and Hobart – remain below 1%, maintaining significant pressure on tenants.
ABS data confirms that rental inflation is slowing, with annual growth falling from 8.5% in December 2023 to 5.5% by April 2025. Domain also reports that house rents across the capitals have held steady for four consecutive quarters – the first stretch of stability since 2019.
The trend follows years of strong growth driven by undersupply and high demand, but a shift in migration and household dynamics is now reshaping rental pressures.
After accelerating in early 2025, rental growth lost momentum over the June quarter. National rents rose 1.3% in the three months to June, easing from 1.7% in the March quarter. On an annual basis, rental values climbed 3.4% – the slowest yearly increase since February 2021.
At the median level, this equates to a $22 per week rise, or an additional $1,134 a year in rent.
Cotality economist Kaytlin Ezzy (pictured) said the moderation came despite a persistent lack of supply.
“The recent moderation in rent growth has occurred despite available rental supply remaining exceptionally low,” Ezzy said.
Over the four weeks to June 29, Cotality recorded approximately 100,000 rental listings nationwide – 23% below the five-year average.
“The shortfall in rental listings has seen the national vacancy rate slip to 1.6% in June, only slightly above the record lows seen in early 2024 (1.5%), and less than half the pre-COVID decade average of 3.3%,” Ezzy said.
Capital city listings were particularly tight, with vacancy rates in Perth and Adelaide sitting below 1%, while Melbourne and Sydney hovered near 1.5%, continuing pressure on tenants.
Ezzy pointed to a cooling in demand as the main driver behind the slowdown in rental growth.
“The slowdown in rental growth instead continues to be driven by a tempering in demand, with the normalisation of net overseas migration and a rise in average household size helping to dampen rental demand,” she said.
Cotality noted that average household size rose to 2.6 persons per dwelling, up from 2.55 a year earlier – a small shift that reduces dwelling demand at scale.
While the easing in growth is a relief to tenants, Ezzy noted that affordability remains a key concern.
“While the moderation in the pace of rental growth is welcome news to many tenants, rents are still increasing, and affordability remains a key challenge for many,” she said.
Nationally, rents have surged 42.7% over the past five years, taking the median rent nearly $200 higher to $665 per week. This means renters are paying approximately $10,350 more annually than in 2020.
“Considering wages, as measured by the ABS wage price index, are up less than half this rate (15.8%) over the five years to March 2025, it’s no wonder household formation trends are skewing larger as a way of spreading out the additional rental cost,” Ezzy said.
The burden of rent has also grown in terms of income share, with the portion of pre-tax income spent on rent rising from 26% in June 2020 to nearly 33% by the end of 2024.
The strain is particularly felt in single-person households and younger demographics, with renters aged under 35 experiencing the sharpest rent-to-income increases, according to Cotality.
Sydney retained its position as Australia’s priciest rental city in June, with a median weekly rent of $796. Perth followed at $721, while Brisbane overtook Canberra for third place with $687.
“Just under three years ago, Canberra held the title for the country’s most expensive city to rent in, but weaker growth conditions, and a compositional shift towards units, have seen the national capital land firmly in the middle of the pack,” Ezzy said.
At the other end of the spectrum, Hobart was the only capital with a median weekly rent below $600, at $581, followed by Melbourne at $613.
Regional areas and smaller capitals are leading annual rental growth.
The combined regions recorded 1.5% quarterly and 5.3% annual increases, compared to 1.3% and 2.7% respectively across the capitals – with internal migration continuing to boost demand in regional markets.
Darwin posted the fastest annual rental growth at 6.2%, followed by Hobart (5.3%), Perth (4.9%), and Adelaide (4.7%). Brisbane’s annual rent growth picked up to 3.8% from a February low of 3.1%.
In contrast, Melbourne (1.2%), Canberra (1.6%) and Sydney (1.9%) all saw slower annual rent growth, falling below their pre-COVID averages.
Click here to access the Cotality media release and the Quarterly Rental Review Report.
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