Australia’s rental market ended 2025 under renewed pressure, with rents accelerating in the final quarter of the year as already-tight vacancy rates tightened further, according to Cotality’s latest Quarterly Rental Review.

National rents rose 1.3% in the December quarter, up from 0.9% in Q3, marking a clear reacceleration in rental growth after a brief period of moderation earlier in the year. The quarterly rise pushed annual rental growth to 5.2%, up from 4.8% in 2024, reinforcing the ongoing affordability strain facing tenants nationwide  .

While the pace of growth remains below the extraordinary rental surges recorded between 2021 and 2023 — when annual increases consistently exceeded 8% — the latest data confirms that Australia’s rental market remains structurally undersupplied.

At the core of the issue is a severe shortage of available rental stock. National rental listings were 11% lower than a year ago in the December quarter and sit 17% below the five-year average, keeping competition among tenants intense. As a result, vacancy rates fell to just 1.7% nationally, well below the pre-COVID decade average of 3.3%.

The prolonged imbalance between supply and demand has driven a sharp rise in rents over the longer term. The national median rent now sits at $681 per week, reflecting a 42.9% increase since December 2020. In dollar terms, that equates to an additional $204 per week for renters over the past five years.

Regional Australia continues to outperform capital cities, with rents rising 6.2% over the year, compared with 4.8% across the combined capitals. However, conditions remain challenging across both markets, with vacancy rates sitting below 2% in most regions.

Among the capitals, Sydney remains the most expensive city for renters, with the median dwelling rent reaching $817 per week. At the other end of the spectrum, Hobart remains the most affordable capital, with a median rent of $601 per week, despite recording one of the strongest annual growth rates.

Darwin led the nation for rental growth in 2025, with rents up 8.2% over the year, followed closely by Hobart at 7.2%. Melbourne recorded the weakest annual growth, with rents rising just 2.9%, though affordability pressures remain elevated.

Cotality Research Director Tim Lawless warned the renewed acceleration in rental growth carries broader economic implications.

He noted that rental costs now account for a significant share of household budgets, with households dedicating a record 33.4% of pre-tax income to rent. With rents holding substantial weight in the Consumer Price Index, continued upward pressure could complicate the inflation outlook and influence future monetary policy settings.

As Australia moves into 2026, the data suggests that without a material lift in rental supply, relief for tenants is unlikely to arrive anytime soon.