National rents climb as supply shortage persists, raising inflation concerns
Australia’s rental sector has experienced a renewed surge in growth, with vacancy rates reaching historic lows, according to the latest Quarterly Rental Review from Cotality.
The seasonally adjusted Rental Value Index from Cotality revealed that national dwelling rents rose by 1.4% in the third quarter, marking the largest quarterly increase since June 2024. This compares to a 1.1% rise in the previous quarter.
On an annual basis, rents increased by 4.3% in the year to September, up from a four-year low of 3.4% recorded in May.
Brisbane and Sydney saw the most pronounced acceleration in annual rental growth, with increases of 1.7 and 1.5 percentage points respectively since June. Adelaide was the only capital to record a slowdown, with growth easing by 90 basis points.
The heightened pace of rental growth has been attributed to a persistent lack of available rental properties, underscored by the national vacancy rate dropping to 1.47% in September.
“Ongoing scarcity in ‘for rent’ listings, coupled with continued strength in rental demand has pushed the national vacancy rate to a new record low of 1.47% – less than half the pre-COVID decade average of 3.3%,” said Kaytlin Ezzy (pictured right), economist at Cotality.
“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.”
Ezzy noted that supply constraints are particularly acute in the unit sector, especially in Sydney, where vacancy rates for both units and all dwellings reached record lows in September at 1.35% and 1.64% respectively. “While investors have comprised an elevated portion of home lending over the past two years, this hasn’t translated into additional available rental stock,” she said.
Median weekly rents in Australia’s combined capital cities exceeded $700 for the first time in August, settling at $702 in September. In contrast, regional rents remained below $600, with the typical regional dwelling renting for $591 per week.
Ezzy observed that the gap between capital and regional rents has narrowed. “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,” she said.
Among the capitals, Sydney remains the most expensive city for renters, with a median weekly rent of $807, while Hobart is the most affordable at $584 per week.
Ezzy also highlighted the broader economic implications of rising rents. “The news that rents are once again rising at a higher rate will be unwelcome news for renters already struggling with the 43.8% or $204 per week increase in rents seen nationally over the past five years,” she said. “But it’s probably also unwanted news for homeowners and landlords servicing a mortgage.”
With rents forming a significant part of the Consumer Price Index, the recent acceleration could contribute to higher inflation. “Along with some renewed upwards pressure from the cost of new dwellings, this renewed momentum in rents may lead to inflation exceeding RBA forecasts, which could keep the cash rate elevated for longer,” Ezzy said.
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