Australia’s rental market is still in crisis, but the story has shifted from “how tight is it?” to “how much more can people actually pay?”.
The new March 2026 Domain Rent Report shows vacancy rates at record lows and rents at or near record highs, yet in a lot of cities, prices are starting to stall because renters have hit their limit.
Here’s what’s happening around the country.
The rental big picture: tight market, budgets maxed out
National vacancy is sitting at around 0.7 per cent, which is a record low and a clear sign there still aren’t enough rentals to go around. At the same time, the report shows rent growth is no longer rising in a straight line everywhere. In some capitals, prices are still climbing; in others, they’re flat but holding at very high levels.
This is where affordability comes in. Domain describes an “affordability ceiling” in this phase of the cycle, where households simply can’t stretch any further even if a place has 50 people at the inspection.
Speaking about the shift, Dr Nicola Powell, Domain’s Chief Residential Economist, told PEDESTRIAN.TV, “Australia’s rental market is still really tight… it’s really challenging to secure a lease, but it’s the affordability aspect that’s really now setting the pace of rental price growth”.
She added, “We’ve got to remember that Australia’s vacancy rate is back to a record low, but… rents aren’t accelerating”, and said this “does indicate that renters have hit their limit” and are becoming “much more price sensitive”.
What’s happening with rent in each state and territory?
New South Wales
In Sydney, rents have climbed to record highs and then stopped. Median asking rents are sitting at around $800 a week for houses and $750 for units, and have now plateaued at those levels instead of jumping again in the busy start‑of‑year period. That’s happening while vacancy is still extremely low, which is unusual for such a tight market.
“Sydney is that market that has hit a ceiling and rents are at [record highs] but they’re no longer rising,” Dr Powell told P.TV.
She called it “really unusual” to see such a tight vacancy rate and flat rents “at such a poignant time of the year, where it is the busiest… the beginning of the year is the busiest time in the rental calendar”, and summed it up by saying, “I think it really says Sydney’s maxed out”.
Victoria
Melbourne is still under pressure, but in a more uneven way. House rents have edged up to about $590 a week, just shy of their previous peak, while unit rents have hit a record $600. For the first time, units are now more expensive than houses.
“The Melbourne scenario is a really interesting one because we’ve got units leading rent growth; they’re at a record high,” Dr Powell said.
House rents “have reached their affordability ceiling” and that “spillover demand is going into units”.
Part of that comes down to location: units are often closer to the CBD or in the middle ring, while rental houses tend to be further out. She also pointed to the start of the uni year, saying “this is where we see the new university year coming, which means there’s lots of new students coming to our big capital cities”, and that those demand pressures “probably tend to go to units” in inner‑city and university precincts.
Queensland
In Brisbane, rents are still rising but at a gentler pace than during the peak years of the crisis. House rents are sitting in the high‑$600s per week and units in the mid‑$600s, both at or close to record highs, with vacancy still very low. The report shows a second consecutive quarter of growth for houses, but annual growth has slowed, which suggests gains are becoming more measured.
Dr Powell described Brisbane as a market that is “still rising, still got a bit of momentum but it seems to be more directed to units”, noting that renters are shifting towards what they see as relatively more affordable options, even if those options are still expensive.
Western Australia
Perth is where the rebound is strongest. House rents have jumped into the mid‑$700s a week and units into the high‑$600s, recording the sharpest quarterly increases of any capital. Vacancy is extremely low, which means almost every listing attracts heavy competition and there’s very little slack in the system.
The report highlights Perth as a city where tight supply is still pushing prices higher, rather than hitting the same kind of affordability ceiling seen in Sydney. For renters, that translates into both high prices and a high risk of being squeezed out altogether if their lease ends.
South Australia
Adelaide’s rents have also reached record highs, with house rents in the mid‑$600s and units in the mid‑$500s. Vacancy remains very tight. What’s different is the shape of the growth: the March quarter tends to bring a strong jump, then conditions ease back, so it looks more like bursts of pressure than a constant surge.
The upshot is that renters are still dealing with very limited choice and elevated prices, but the runaway acceleration of previous years appears to have passed its peak.
Tasmania
Hobart is one of the most intense markets in the country. Rents for both houses and units are at record levels, and vacancy is among the lowest of all capitals. Because the market is small, any extra demand — such as new arrivals or locals who might once have bought but are now stuck renting — quickly translates into higher asking rents and more brutal competition..
Australian Capital Territory
In Canberra, house and unit rents are holding at record highs while vacancy has tightened again to under 1 per cent. The interesting thing is that rents are flat rather than continuing to jump each quarter. That points to the same pattern seen in Sydney: conditions are still tough, but there’s a limit to how much more tenants can pay, even in a city where wages are relatively high.
Northern Territory
Darwin has also hit record rents, with house and unit prices both elevated and vacancy extremely low. House rents have started to rise again after a stable patch, while unit rents are holding at high levels. It’s another example of a very tight market where affordability is shaping how fast and how far prices can move, rather than letting them surge unchecked.
How renters are changing their lives to cope
The stats are one thing, the way people are living because of them is another. Dr Powell said she has been given “many examples” of renters changing their behaviour just to stay housed.
“How that plays out in real life is tenants downsize,” she told PTV.
“So they opt for a cheaper location, a smaller dwelling, perhaps a less favorable location than what they wanted; they shift to units.”
In other cases, people are leaning on their families or packing more people into the same home. “Some people are just trying to get out of the rental market — moving back in with family members, or they go into a house share or they get a housemate into their apartment or unit,” she said.
She also stressed who this hurts most.
“When you look at those households that are most vulnerable — it’s obviously low‑income households — but actually a big chunk of low‑income households are actually renters,” she told PTV.
She described renters as “a really vulnerable group of our society that is really exposed to changes in affordability, cost of living”, and said that once budgets hit the wall, “you have to make decisions to make that household balance sheet work for yourself”.
What might actually help ease the pressure for renters?
None of this gets fixed with one neat policy. Dr Powell was very clear that “there’s no one quick fix; it needs to be… a multi‑pronged approach”.
On supply, she said governments at all levels need to “unlock supply; that means reducing red tape, speed to approvals, even looking at the taxation that’s involved in providing new supply”.
She pointed out that “when you look at the property market, it is one of the most taxed sectors of our economy — up to 40 per cent of the cost of a new home is tax”, and argued that we need to ask “what are some of the pressure points that we can really alleviate in helping to drive affordability in that tax component of a new home”?
She also flagged the upcoming federal Budget as a big one for the rental market. With talk of changes to investor tax settings, she said, “The Budget’s going to be one to watch, I think, for the rental space”.
One idea she raised was whether any changes to capital gains tax could be used to “really funnel that investor activity into creating new homes… more dwellings in Australia”, by focusing incentives on new builds rather than existing stock.
At the same time, she is worried about costs making it even harder to build.
“We are in a re‑emerging cost‑of‑living crisis,” she said, and warned that the war “is going to impact supply chains, it’s going to put pressure on construction costs”, which means “the cost of a new build is going to continue to rise”.
Her concern is that this “disrupts feasibility; it means projects are not able to get off the ground”, and that would “have a detrimental impact on the supply pipeline”.
For younger renters eyeing a first home, the outlook is complicated.
“It is challenging for young Australians and those that perhaps don’t have financial support from family members to make their property purchase,” she told PTV.
After back‑to‑back rate hikes, she said “there is a high possibility that we will see more rate hikes being delivered”, and her advice was simple: “Make sure you do have a buffer in place, because the expectation that the cash rate is going to increase further this year is a reality”.
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