Affordability pressures and rising supply begin to cool rent increases
Rental growth across Australia’s capital cities is continuing to slow, according to Domain’s March Quarter 2025 Rent Report, even as rental prices remain at record highs.
For the first time since 2019, house rents in the combined capital cities were unchanged for three straight quarters. Annual house rent growth fell to its lowest point in four years.
Meanwhile, unit rents saw a modest reacceleration during the March quarter, though the pace of growth was the slowest for a March quarter in four years.
While the early months of the year typically bring a seasonal lift, affordability is becoming a key constraint. Tenants are increasingly prioritising value, and rental budgets are showing signs of strain.
According to the Domain report, unit rents outpaced house rents in Sydney, Melbourne, Brisbane, Canberra and Hobart during the quarter, indicating a shift in tenant preferences driven by cost considerations.
Despite rents sitting at all-time highs in every capital city, the rate of increase has slowed markedly. Sydney’s house rental market posted its weakest growth since 2019, while Perth saw its slowest since 2020. Brisbane and Melbourne followed with their softest performance since 2021, and Adelaide posted its weakest since 2022. Annual growth has eased to its lowest point in nearly five years in Sydney and Perth.
For units, Perth experienced its slowest March quarter since 2018. Adelaide’s last weaker quarter was in 2019, while Sydney, Melbourne and Brisbane all saw their softest growth since 2021 or 2022. In contrast, Hobart and Darwin recorded their strongest March quarter since 2022, rebounding from previous underperformance.
Annual growth in unit rents has also declined sharply. Brisbane’s rate is at a 3.5-year low, while Sydney, Melbourne and Adelaide are around three-year lows. Perth’s annual growth is the lowest in 2.5 years.
Although conditions still favour landlords, the pace of rental increases is slowing due to several factors. These include affordability constraints, gradual improvements in rental supply and the usual seasonal slowdown following the summer peak.
“Despite a softening of growth, the data suggests Australia is still very much a landlord’s market,” said Nicola Powell (pictured above), chief of research and economics at Domain.
“Most cities experienced 5% or less annual change, a sharp drop from the double-digit gains seen in recent years. Increasing supply is slowing price growth, and while it’s still not enough to fully meet demand – we can see that it’s helping to rebalance some of the tightest rental markets.”
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