The outlook for residential property investment in Australia remains generally positive, although performance is expected to vary significantly by location and property type.
Key Findings
Housing Rental Market Analysis – May 2026
Rental shortages persist- with vacancy rates at or below- 1% - in most capital cities.
Darwin recorded the strongest rental growth:
House rents increased- 9.7% during May and - 17.6% annually.
Unit rents increased- 21.5% over the year.
Sydney remains the most expensive rental market:
Median house rent:- $850 per week
Median unit rent:- $800 per week
Melbourne remains the most affordable capital city- for house rentals among the major capitals at- $600 per week.
Monthly house rent growth:
Darwin: +9.7%
Canberra: +3.8%
Sydney: +1.8%
Melbourne: +0.8%
Brisbane, Adelaide and Perth: stable
Hobart: -1.4%
Why Rents Continue to Rise
The report suggests that despite:
Lower migration levels,
Increased first-home buyer activity,
there is still a significant shortage of housing supply, which is keeping vacancy rates exceptionally low and supporting continued rental growth.
Unit Rental Market Analysis – May 2026
The unit rental market across Australia's capital cities remained tight during May, with demand strengthening after the Easter and school holiday period.
Key Highlights
Darwin continues to lead the market
Unit rents increased- 4.0% during May.
Annual growth reached- 21.5%, the strongest of all capital cities.
Other strong monthly performers
Brisbane: +1.5%
Adelaide: +1.4%
Melbourne: +1.3%
Canberra: +0.6%
Stable markets
Perth
Hobart
Sydney's short-term decline
Sydney unit rents fell 1.8% during May.
Despite this monthly decline, Sydney remains Australia's most expensive unit rental market.
Annual Unit Rent Growth
City Annual Growth Darwin +21.5%, Sydney+6.7%, Perth+6.5%, Hobart+6.1%, Melbourne-0.4%
The data suggests that while Sydney experienced a temporary monthly correction, underlying rental demand remains strong, evidenced by annual growth of 6.7%.
Weekly Median Unit Rents
City Median Weekly Rent Sydney $800, Hobart $520
Sydney remains the most expensive unit market in Australia, while Hobart continues to offer the most affordable unit rents among the capital cities.
Vacancy Rates Remain Tight
Unit vacancy rates remain:
Generally below 1.5% across capital cities.
Lower or unchanged during May.
Indicative of ongoing rental shortages and strong tenant demand.
The exception remains Canberra, where vacancy rates are somewhat higher than in other capitals.
Investment Market Implications
For property investors, the report indicates:
Strong rental demand remains in place.
Low vacancy rates support stable tenancy outcomes.
Rental yields may continue to improve as rents rise.
Any policy changes that discourage private property investment could reduce rental supply further, placing additional upward pressure on rents.
Outlook
Unless there is a substantial increase in housing construction and rental stock, Australia's rental market is likely to remain tight, with:
Low vacancy rates,
Strong tenant demand,
Ongoing upward pressure on rents throughout the coming years.
For investors, particularly in supply-constrained markets such as Sydney, Darwin and Perth, the fundamentals remain favourable from a rental income perspective.