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Investors’ strategy to shift as unit rents outperform houses
Investors seeking cash flow may need to adjust their strategies, as units drove most rental growth over the last quarter and the price gaps between houses and apartments tightened further.
Rental properties across the country have entered a period of change, with the market slowing to match renters' affordability despite low supply and competition still strong.
According to Domain’s December Quarter Rent Report, at the national level, rental conditions have been fragmenting, with some markets still growing, while others have slowed or stabilised.
Domain’s chief of research and economics, Dr Nicola Powell, said that growth has eased and will be more selective than in the last couple of years, where most capital cities saw rapid increases.
Data showed that the gap between houses and units is widening, with Sydney house rents rising as units stall, while in Melbourne and Canberra, units lead as renters prioritise affordability, shifting city-level demand patterns.
“The market is no longer moving in one direction. Rent changes now depend heavily on where you live and whether you’re renting a house or a unit,” Powell said.
Sydney
In the December quarter, Sydney remained the most expensive rental market, with flat or little growth, reflecting a tight but affordability-constrained market rather than renewed acceleration.
Sydney house rents reached a new record of $800 per week, rising by 1.3 per cent or $10, marking the strongest December results since 2023.
Data showed the rental gap between houses and units narrowed further over the last three months, with apartments now reaching a median of $750 per week.
Domain said that while house rents are outpacing units now, the $50 price gap showed renters’ ongoing preference for apartments as a more affordable alternative.
Brisbane
Australia's second most expensive capital city also recorded a sharp rise in its rental market, reaching its fastest pace in nine months and delivering the strongest December result in two years.
Brisbane house rents climbed to a new record $670 per week in the December quarter, rising 3.1 per cent or $20, while unit rents reached $650 per week, marking a quarterly increase of 3.2 per cent.
Unit rents have only slightly outpaced houses, narrowing the price gap to $20, its smallest in nearly two years, making Brisbane the second-most expensive city for unit rentals, alongside Perth.
Perth
For the second consecutive quarter, Perth house rents held steady at $700, marking the longest stretch of stability in more than six years.
Similarly, Perth unit rents remained unchanged at $650 a week for a third straight quarter, marking their longest stretch of stability in around seven years and the softest December quarter result since 2021.
As Perth’s rental market continues to stabilise, annual growth has slowed to 4.5 per cent for houses and 4.8 per cent for units, the weakest pace in 5.5 years and well below the rapid gains of 2020–24.
Adelaide
According to Domain, Adelaide’s rental market has shifted into a deeper slowdown, with rents flat for several quarters, signalling a more structural cooling after years of outsized growth.
In the December quarter, Adelaide house rents held steady at $620 per week, marking the first time in six years that rental prices flattened for two straight quarters.
Adelaide unit rents rose slightly by 1.0 per cent or $5 to a record $525 per week, indicating more controlled growth.
Across the quarter, units continued to outperform houses, with the price gap shrinking to $95, the narrowest since 201, as renters increasingly traded space for affordability.
Melbourne
For the first time since 2012, house and unit rents are now on par at $580 per week, highlighting how demand has shifted toward units.
In the December quarter, Melbourne house rents stabilised at $580 per week following earlier declines, while unit rents rose 0.9 per cent to a record $580, marking the strongest December for apartments in two years.
Domain said that Melbourne’s rental market showed pockets of resilience rather than broad growth, with units outperforming houses as renters increasingly prioritise affordability.
Across the country, Powell said more renters are choosing units, driving stronger rent growth than houses in Melbourne, Brisbane, Adelaide, Canberra, and Darwin.
“Rents are still at record highs, but household budgets are under pressure. In many areas, renters now need an income of more than $100,000 to rent comfortably.”
“Conditions still favour landlords, with very low vacancy rates across all capital cities. However, increased investor activity and ongoing support for first home buyers could help ease the shortage of rental homes over time, with the market starting to rebalance in 2026,” she concluded.
