Australia's rental vacancy rate rises to 2.1% as rent growth slows

In this article

Written by

Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

About Kooky and Shaka →

Australia's rental market lost much of its momentum in the September quarter, according to Cotality's quarterly rental review published on 9 October 2026. National rents rose 0.5% over the three months, the national vacancy rate climbed to 2.1% and gross rental yields reached 3.85%, their highest level since August 2019.

The figures describe a market that is loosening at the edges rather than turning. Rents are still rising across most of the country, and more homes are sitting empty between tenancies than at any point since early 2025, yet the vacancy rate remains well short of where it sat before the pandemic. Sydney, the country's most expensive rental city, was the exception on price: its rents fell over the quarter.

Cotality quarterly rental review, September quarter 2026, published 9 October 2026.

Three quarters of slowing growth

The quarterly result is the latest step in a steady deceleration through 2026. Cotality's figures show national rents rose 2.1% in the March quarter and 1.6% in the June quarter before the 0.5% rise recorded in the three months to September. Each quarter has added less to rents than the one before it.

The annual pace has eased more gently. On Cotality's measure, the annual rate of rent growth eased from 5.9% to 5.5%. The national median dwelling rent now stands at A$713 a week.

The longer view explains why the market has been under strain. Over five years, Cotality calculates that unit rents have risen 44.3%, or about A$208 a week, and house rents 36.6%, or about A$195 a week. Over that period, units have recorded the larger rise of the two, in percentage terms and in dollars.

In the latest quarter, the order was reversed. House rents rose 0.6% and unit rents 0.3%, and over the year houses were up 5.8% against 4.9% for units. Unit rents fell over the September quarter in Sydney, Canberra and Hobart.

Vacancy reaches its highest level since January 2025

The vacancy rate is the measure that tells landlords and property managers how quickly a vacant home finds a tenant. Cotality's national rate rose from 1.7% in both the March and June quarters to 2.1% in September, the highest reading since January 2025. As recently as February, the national rate had matched its record low of 1.5%.

That rise of 0.4 percentage points in a single quarter means tenants have more homes to choose from than they did earlier in the year. It is also modest in context. Cotality puts the pre-COVID decade average at 3.3%, so the national rate remains more than a full percentage point below its long-run norm. A market at 2.1% is still tight by historical standards; it is simply less tight than it was.

The capital cities have moved in different directions. Sydney's vacancy rate rose to 2.5% from 1.8% a year earlier. Hobart's climbed to 3.1% from 1.3%, more than doubling over twelve months and taking the Tasmanian capital close to the national pre-COVID average. Adelaide sits at the other end of the range: at 1.4%, it is the tightest rental market among the capitals in Cotality's figures.

Cotality's vacancy figures are its own counts, and the firm's reading of the current shift, set out below, points mainly to the demand side.

Sydney goes backwards while Darwin surges

Sydney was the only capital city to record a fall in rents over the September quarter. Dwelling rents there slipped 0.4%, the city's first quarterly decline since December 2024. At A$843 a week, Sydney remains the most expensive rental capital, ahead of Perth at A$798 and Darwin at A$774.

Darwin produced the strongest result. Rents in the Northern Territory capital rose 5.8% in the quarter and 11.6% over the year, which Cotality describes as the strongest growth nationally. Adelaide recorded quarterly growth of 1.7%, while Canberra and Hobart barely moved, at 0.1% and 0.2% respectively.

The gap of 6.2 percentage points between Darwin's quarterly rise and Sydney's fall shows how far apart the capital city rental markets have drifted. The table below sets out the quarterly change for the capitals covered in the review, with the detail that matters most in each.

Outside the capitals, rents grew faster than in the cities this quarter. Regional rents rose 0.8% against 0.4% for the combined capitals, and over the year regional markets were up 5.6% against 5.5% for the capitals. The annual gap is narrow, a tenth of a percentage point, but the quarterly gap is wider.

The affordability ceiling

Cotality's research director, Tim Lawless, attributes the slowdown largely to what renters can afford to pay. He said rents have risen substantially faster than incomes over the past six years, and that renters now have less capacity to absorb increases at the rate seen in recent years. "The consequence is that renters are reaching an affordability ceiling," he said.

The firm's own affordability data, which Mr Lawless cited, showed rental households spending about 34% of their pre-tax income on rent in June, the highest share on record.

Mr Lawless said rental growth was strongest through the pandemic, when average household sizes fell sharply as people sought more space. He now sees rental demand as likely to be restructuring the other way, as people form larger households, stay in the family home for longer or look further afield for more affordable accommodation.

"Rental growth appears to have reached, or is close to, a ceiling," he said.

Slower population growth adds to the picture. The Australian Bureau of Statistics reported on 17 September 2026 that the population grew 1.4% in the year to March 2026, an increase of 392,700 people to 27.9 million. Net overseas migration over that year was 292,100, down from 309,500 in the previous twelve months. Cotality notes that a 1.4% rate sits below the pre-COVID decade average of 1.6%.

On the supply side, Mr Lawless said dwelling completions have been relatively flat for an extended period, and that supply constraints persist despite high levels of investor lending through much of 2025. In his reading, the slowdown in rents and the rise in vacancy are more about demand adjusting than a significant increase in rental supply.

Yields climb to their highest since 2019

The other half of the story belongs to landlords. Gross rental yields measure annual rent as a share of a property's value, and they rise when rents hold up better than prices. Cotality's national gross yield rose to 3.85% in September, up from 3.61% a year earlier and the highest since August 2019.

The improvement has come mostly from the capitals. Capital city yields rose from 3.40% to 3.70% over the year, while regional yields were unchanged at 4.31%. Regional markets still offer the higher return on paper, but the capitals have closed some of the distance.

Between individual cities, the gap is wide. Darwin recorded the highest gross yield of any capital at 6.52%, while Sydney had the lowest at 3.40%, a difference of more than three percentage points.

A higher yield does not by itself mean a property pays for itself. Cotality points out that mortgage rates for new investor loans are averaging in the mid-to-high 6% range, and says that with holding costs this high, new investors will find it hard to secure a property with a positive, or even neutral, cash flow.

What it means for tenants, landlords and agents

For tenants, the September quarter brings some relief at the margin rather than a reversal. In Sydney and Hobart in particular, where vacancy has risen sharply over the year, the balance has shifted further than the national figure suggests. Rents, though, took a record share of renters' incomes on Cotality's June affordability measure, and in most capitals they are still rising.

For landlords, the picture is mixed. Yields are at their highest since August 2019, yet Cotality's own reading is that renters have less capacity to absorb further increases, and that new investors face holding costs that make a neutral cash flow hard to reach. Adelaide, with the tightest vacancy rate among the capitals at 1.4%, is the city where tenants still face the least choice.

For property managers, the shift shows first in the cities where vacancy has risen sharply, Sydney and Hobart among them. In New South Wales, the picture now has another source of evidence in a mandatory End of Tenancy Survey: the state government reported on 8 October 2026 that the first results, drawn from more than 275,000 responses from landlords and agents, showed about 85% of leases were ended by renters rather than by landlord action.

Looking ahead, Mr Lawless expects vacancy rates to remain below average over the coming year, which would keep the national market tighter than its pre-pandemic norm even as rent growth stays subdued. The figures for the December quarter will show whether Sydney's fall was a pause or the start of a longer softening, and whether the national vacancy rate keeps climbing from 2.1%.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

About Kooky and Shaka →