Rent prices soar once again following brief lull as supply constraints bite
Rental price growth has swelled once again following a prolonged period of stagnation.
In what will make for bad reading for already struggling renters, Cotality’s seasonally adjusted Rental Value Index documented a 1.4% rise in the third quarter of 2025, the largest three-month increase since June 2024.
It marks a notable uptick from the 1.1% lift recorded in the second quarter of 2025. Over a 12-month basis, rental prices across Australia were up 4.3% in September, a significant improvement from the four-year low of 3.4% documented in May.
Cotality economist Kaytlin Ezzy attributed the swell in rent prices from an ongoing shortage in rental supply, with vacancy rates hitting a record low in September.
“Limited supply continues to be a major catalyst in rising rents, with the number of rental listings tracking approximately 25% below the previous five-year average nationally for this time of year,” said Ezzy.
Sydney’s unit sector is particularly tight at just 1.35% vacancy, noted Ezzy, compared to 1.64% across Sydney’s broader dwelling market.
Sydney remains the most expensive capital for renters at an average of $807 per week, while Hobart remains the most affordable at $584 per week.
“While investors have comprised an elevated portion of home lending over the past two years, this hasn’t translated into additional available rental stock,” said Ezzy.
The median rental value across Australia’s combined capital cities is now more than $700 for the first time, while regional rents remain below the $600 mark at $591.
But the gap between capital and regional rents is narrowing.
“With the regions outperforming the capitals through the second half of 2024 and into 2025 the affordability advantage offered by regional rental markets has reduced from $123 in May 2024, to $111 in September,” Ezzy said.
The resurgence in rental price growth follows a period of stagnation.
The June quarter marked the smallest second-quarter rise since 2020. The first quarter, meanwhile, was the weakest first-quarter for rental price growth since 2019.
This slump was evidently an exception to the rule, with rent prices once again surging.
Investors taking greater share of housing market
The gap between investor and owner-occupier loans hit its narrowest point in four years this June, per Money.com.au’s Mortgage Insights report.
In New South Wales alone, investor loan numbers outpaced the owner-occupier segment by a walloping 600% on a year-on-year basis in June 2025.
“Investors are now taking a larger share of the loan market – traditionally a sign of market confidence and broader prosperity,” Debbie Hays, property expert at Money.com.au, said at the time.
“The expectation is that growing investor activity will inject much-needed capital into the housing sector, boost rental supply, and support broader economic growth, particularly once the RBA moves back into a hold position with the cash rate, potentially sometime next year,” Hays added.
But for now, supply remains exceptionally tight – particularly given the Labor government’s target to build 1.2 million homes by 2029 continues to fall behind schedule.
Recently expanded government incentives, meanwhile, are expected to inject even more demand-side pressure into the housing market.
