Australia's rental market remained under significant pressure throughout 2025, with tenants in most cities facing another year of above-average rent increases. National rents climbed 5.2% over the year, pushing the median weekly rent to $681 (Source: Cotality Quarterly Rental Review). While some relief looked possible at various points during the year, low vacancy rates and constrained supply kept upward pressure firmly in place. Here's a city-by-city look at where rents moved fastest - and what it means if you're considering an investment property.

The National Picture

The national vacancy rate finished 2025 at just 1.7% - well below the pre-COVID average of 3.3% that was generally considered a balanced market. Available rental listings fell 11% year-on-year, meaning fewer properties were competing for tenants, and landlords retained strong pricing power throughout the year. The combination of population growth driven by migration, sluggish new housing construction, and a hesitant investor market created the conditions for sustained rental inflation.

Which Cities Led Growth

While every capital city recorded some level of rent growth, three markets stood out well above the national average:

  • Hobart: Led all capital cities with rent growth of 9.1% over 2025. Hobart's relatively small rental pool makes it particularly sensitive to shifts in demand, and strong interstate migration contributed to tightening conditions throughout the year.
  • Darwin: Rents rose 8.3%, supported by increased activity in the resources sector and defence-related employment. Darwin's rental market has historically been volatile, but conditions remained tight for most of 2025.
  • Perth: Continued its multi-year run of strong rental growth, with rents up 7.7%. A robust local economy and sustained population inflows kept vacancy rates at some of the lowest levels in the country.

At the other end of the spectrum, Melbourne recorded the weakest growth of any capital city at just 2.9%. It was also the only city where house rents actually declined, falling 0.9% over the year - a reflection of elevated new supply in some areas and a more challenging investor environment.

Most Expensive Markets

Growth rates tell one story, but absolute affordability tells another. When it comes to raw weekly rent levels, Sydney remains by far the most expensive city to rent in:

  • Sydney: $760 per week median rent - the highest in the country by a significant margin and a genuine barrier to entry for many households.
  • Perth: $700 per week, reflecting both strong demand and the fact that Perth's rental market has been playing catch-up after years of relatively flat conditions.
  • Darwin: $650 per week, notable given that Darwin's median property prices remain considerably lower than Sydney or Melbourne - meaning rental yields are among the strongest in the country.

Regional vs Capital Cities

One of the more significant trends of 2025 was the continued outperformance of regional rental markets. Regional areas recorded average rent growth of 6.2%, comfortably ahead of the 4.8% average across capital cities. This reflects ongoing demand from remote workers, lifestyle seekers, and households priced out of capital city markets. Coastal and tree-change areas in particular continued to attract strong tenant interest, sustaining conditions that favour landlords.

What This Means for Property Investors

For those considering purchasing an investment property, the rental data paints a broadly supportive picture, though market selection matters enormously:

  • Yield opportunities in Darwin and Perth: Both cities offer a combination of relatively affordable entry prices and strong weekly rents, translating into gross yields that are difficult to find in Sydney or Melbourne.
  • Hobart's growth story: Strong rent growth in Hobart has improved yields, though investors need to weigh the smaller market size and potential for volatility.
  • Melbourne caution: Slowing rent growth and falling house rents suggest Melbourne's investor landscape needs careful assessment, particularly for those relying on rental income to service debt in a higher-rate environment.
  • Regional opportunities: Regional markets offer a compelling combination of above-average growth, lower purchase prices, and in many cases, lifestyle appeal that continues to attract quality long-term tenants.

Outlook for 2026

Forecasters at KPMG project national rent growth of around 3.5% through 2026 and into 2027 - a moderation from 2025's pace, but still above long-run historical averages. New housing supply is expected to slowly improve vacancy rates in some markets, but the structural undersupply of rental stock that built up over several years is unlikely to resolve quickly. Investors entering the market in 2026 can reasonably expect conditions to remain tilted in their favour, particularly in markets where vacancy rates remain below 2%.

If you're thinking about purchasing an investment property and want to understand your borrowing options, the Loan Hive team can help you find the right financing structure for your goals. Get in touch and let's start the conversation.