Sydney asking rents fall as affordability pressures build
Sydney asking rents fell 0.4 per cent in the September quarter, marking their first decline in almost two years as household affordability constrained what tenants could pay.
Cotality data placed Sydney’s median rent at $843, with a gross rental yield of 3.4 per cent and a vacancy rate of 2.5 per cent. National rents still increased by 0.5 per cent during the quarter, but that was well below growth of 1.6 per cent in June and 2.1 per cent in March.
Affordability slows rental growth
Australian rents have risen 39 per cent over the past five years, creating sustained pressure on household budgets. Cotality research director Tim Lawless said renters were contending with tight vacancy conditions while inflation-adjusted incomes moved backwards.
Some households were responding to higher costs by sharing homes with more people. Lawless also said elevated rents were making it harder for renters to save a home deposit and were weakening household balance sheets.
The national vacancy rate rose to 2.1 per cent, compared with 1.6 per cent a year earlier. Even so, supply remained tight in several cities. Domain chief residential economist Nicola Powell said the stalling of rental growth in some highly constrained markets indicated that tenant affordability was becoming a stronger limitation.
Cotality’s figures model asking rents, while the Australian Bureau of Statistics measures rents tenants are actually paying. The latest inflation figures showed actual housing rents increasing 3.6 per cent over the year to August.
Lower dwelling values lift rental yields
For property investors, slower rent growth has occurred alongside falling residential values. Capital-city rents rose 0.4 per cent over the three months to September, while capital-city dwelling values fell 4.3 per cent over the same period.
Lawless said gross rental yields were at their highest level since August 2019 because rental income was holding up more strongly than property values. He said yields had taken on greater importance following property-investment tax changes announced in the May budget.
Commonwealth Bank senior economist Trent Saunders expected much of the adjustment to investors’ required returns to occur through dwelling prices rather than higher rents. He forecast the national gross rental yield would increase from about 3.75 per cent in mid-2026 to approximately 4.5 per cent by late 2027, which he said should progressively help stabilise investor demand.
Landlord costs meet tenant resistance
Some market participants expect the rental slowdown to be temporary. Ray White chief economist Nerida Conisbee said Sydney rental availability remained near a decade low and noted that measures of rents actually paid were still rising.
However, property agents reported signs that advertised rents were meeting resistance. Hudson McHugh agent James Price said rental listings in Sydney’s inner west were taking longer to lease, indicating that some tenants could not meet advertised prices.
BresicWhitney chief executive Will Gosse said landlords were carrying higher costs after four interest-rate increases during the year, while tenant budgets had not risen at the same pace. He said owners needed realistic advice on what the market would pay before beginning a leasing campaign.
SOURCE ATTRIBUTION:
Based on reporting by The Australian Financial Review, published 9 October 2026.
