Rents Surge Across Australia Amid Persistent Supply Shortages
Australia’s rental market is facing renewed pressure in the first quarter of 2026, with tenants spending an unprecedented share of household income on rents. Persistent supply shortages and rising demand are driving rental growth across the country, intensifying affordability challenges and influencing broader economic indicators.
Rental Market Performance
Cotality’s Rental Review Q1 2026 shows national dwelling rents rose 2.1% over the three months to March, up from 1.2% in Q4 2025, reflecting a reacceleration from the cyclical low of 0.9% in Q3 2025. On an annual basis, rents are now 5.7% higher than a year ago, up from 5.2% in Q4 and a mid-2025 trough of 3.4%.
- 2.1% increase in national dwelling rents over the three months to March.
- 5.7% annual increase in rents compared with a year earlier.
- 33.1% of gross median household income is now committed to rent.
Households are committing a record 33.1% of gross median household income to rent, compared with a recent low of 26.2% in September 2020. “Five years of sustained rental growth have added an estimated $202 per week to the typical household rent commitment,” said Gerard Burg, Head of Research at Cotality Australia.
Source: Cotality Australia – Rental Review Q1 2026Supply Constraints and Vacancy Pressures
National rental listings are roughly 18% below their five-year average, with shortages most acute in Sydney and Melbourne, where available stock is 27.4% and 21.0% below long-term levels, respectively. Every capital city recorded a vacancy rate below 2.0% in March, with the national rate at 1.6%, half the five-year average.
Adelaide and Perth are among the tightest markets, with vacancy rates at 1.0% and 1.2%, reflecting persistent supply deficits.
Source: Cotality Australia – Rental Review Q1 2026Regional and Property-Type Dynamics
Regional rental markets recorded slightly stronger growth than combined capitals, with rents up 6.0% year-on-year, compared with 5.6% across capital cities. Units continue to outpace houses, rising 2.5% over the three months to March versus 2.0% for houses.
Since March 2021, unit rents have increased 46.9%, compared with 39.0% for houses, as renters increasingly seek more affordable options. Darwin saw the largest annual rental growth among capital cities at 9.2%, while Sydney remains the most expensive market, with median rents at $824 per week. Melbourne recorded the slowest growth among mainland capitals at 4.4% annually, with median rent at $632 per week, marginally above Hobart at $609 per week.
Source: Cotality Australia – Rental Review Q1 2026Market Outlook
Persistently low vacancy rates and limited new supply suggest continued upward pressure on rents in the near term. Burg noted, “The rental market continues to exert upward pressure on the broader economy. With vacancy rates showing little sign of improvement and market rents reaccelerating, the impact on CPI and inflationary measures will remain an important consideration for policymakers.”
While residential construction activity remains an important part of the longer-term supply response, new dwelling delivery continues to face constraints from planning timelines, construction costs, labour availability and broader market capacity pressures.
Sources: Cotality Australia – Rental Review Q1 2026; ABS – Building Activity, Australia, Cat. No. 8752.0