Market knowledge becomes key amid tight rental conditions

The report found that house rents rose by $20 over the June quarter, raising annual growth to its highest level in two years, with the majority of the growth concentrated in Sydney, Brisbane, Canberra, and Darwin.

Domain chief residential economist Nicola Powell said the rise of weekly rent had been driven by a tight rental market and uncertain economic conditions.

“I think it’s notable timing; we have had three rate hikes this year, obviously increasing the holding costs for investors and mortgage costs,” Powell told REB.

“We are still in a landlord’s market, and you’ve got market conditions that are allowing that pass-through of higher rents to actually occur.”

Powell said that the latest government tax reforms had significantly shifted how Australians viewed their property plans, with the rent increase pushing first home buyers to enter the market sooner.

“Likely what is going to happen is we will see more first home buyers come into the market and we will see more tenants transitioning to become home owners.”

She said the reacceleration in rent prices would make the transition more challenging, making it harder for prospective buyers to save enough to secure a deposit.

The nation’s biggest movers

Domain’s latest data found that Sydney’s median rental price had soared by $50 over the quarter, reaching a peak of $850 per week.

The data also showed that Darwin had overtaken Perth as the nation’s second most expensive capital city, growing by 11.8 per cent over the year to reach $760 per week.

Powell said the boom in Darwin’s rental market had been driven by its incredibly tight vacancy rate, with the Northern Territory capital boasting just 0.1 per cent.

She said that while the Darwin rental market typically tightens over the dry season, it is especially competitive due to infrastructure, defence jobs, and high demand from a transient population.

“All of this feeds into it (the low vacancy rates), and it has seen extreme rental growth in the recent quarter.”

“I suspect we will start to see the vacancy rate lift as we move out of the dry season, but I think rental growth has been quite strong in Darwin, and I think that’s just reflective of the rental demand.”

Impacts of a constricted rental market

Powell said that policy changes inviting first home buyers to enter the property market would likely have adverse ramifications for the supply of homes for rent.

“I mean, the question then becomes how much further can rents rise? Because some of our cities are at an affordability ceiling, and I think that’s coming through in the slower rates of rental growth, despite having close to record-low vacancy rates in many of our capital cities.”

As tenants reached their affordability ceilings, Powell said that they were shifting their housing priorities, and either targeting cheaper property types or increasing the number of tenants in a dwelling.

With a reliance on market knowledge, consumers should draw on the accumulated experience of property professionals to gain a better understanding, with Powell saying that it is vital to understand the range of reactions of the market

“One of the key themes nationally is that there’s no one rental market, and there are diverse conditions across our different capital cities, and even between property types.”

“It’s actually doing that market research, understanding the dynamics of that local area and using it to really inform a better decision.”

Heading into the back half of 2026, Powell said she expected fewer new investors to enter the market as shifting sentiment causes the market to begin to slow.

“I think what we are likely to see is that record rents are just going to be a theme of our rental market. And what we could see is that rental conditions tighten further in the months to come.”