After months of easing growth, Australia’s rental market is showing signs of renewed strength – and seasoned property investors should be watching closely.

With vacancy rates holding near record lows and quarterly rent growth accelerating, the second half of 2025 presents a window of opportunity for those looking to optimise returns or expand their portfolio.

Rising yields in select markets, combined with improving serviceability, are reshaping the investment landscape, so whether you plan to refinance, rebalance or buy, understanding how rents and yields are shifting is essential.

Rental growth is picking up again

After easing through much of 2024, national rental growth is showing early signs of reacceleration. According to CoreLogic, rents rose 1.3% over the June quarter, the smallest second-quarter rise since 2020 but slightly higher than late 2024.

The unit market continued to outperform houses, with rents rising 1.6% for the quarter, compared with 1.2% for houses. This reflects growing demand for more affordable, centrally located housing in cities where house rents have pushed beyond the reach of many tenants.

For investors, this trend may signal stronger ongoing demand in the medium-density sector, especially in inner-urban areas.

Annual rent growth also moderated to 3.4% over FY24-25, the weakest yearly gain since early-2021. This equates to a $22 per week median increase.

Across the capitals, Darwin led unit rent growth at 9.0% while Hobart recorded the strongest growth in house rents at 4.8%. In contrast, Melbourne house rents rose just 0.7% and Canberra unit rents increased only 1.6% over the year.

Despite the slowdown, affordability pressures remain high. Rents have climbed 42.7% in five years, compared with just 15.8% growth in wages over the same period.

These figures highlight a complex rental landscape – one where affordability, supply constraints, and shifting demand are playing out differently across cities and dwelling types. 

Vacancy rates remain critically low

Persistently low vacancy rates are adding pressure to already tight rental markets. According to CoreLogic, the national vacancy rate held steady at 1.6% in June – only slightly above record lows.

Total advertised rental listings were also 22.7% below the five-year average, highlighting an entrenched supply-demand imbalance. 

Shortages are most severe in cities with strong population growth and limited housing supply. For investors, this means tighter competition, fewer days on market and better tenant retention, reinforcing the potential for ongoing rental growth even in markets already seeing large increases.

Gross rental yields remain stable

Rental yields held firm in the June quarter, providing a degree of consistency for investors seeking reliable income returns. National gross rental yields sat at 3.7% for the third consecutive month, reflecting the sustained balance between rising rents and housing values.

Yields also remained steady across capital city and regional markets, at 3.5% and 4.4% respectively. While these figures represent a plateau rather than an increase, the stability is notable given recent volatility in other investment classes.

City-level results show further nuance. Yields rose slightly in Sydney (3.05%), Brisbane (3.66%) and Canberra (4.11%), while Darwin saw the most significant shift, with yields falling 0.16 percentage points quarterly to 6.51% (still the highest of any capital city).

Stable yields, paired with easing borrowing costs and solid rental demand, provide a solid base for holding income and expanding portfolios in the second half of 2025.

Strategic opportunities are emerging for investors

National property markets have entered a strategic growth phase, presenting new opportunities for informed investors, according to the latest PIPA Adviser.

Brisbane has overtaken Melbourne as the second-most expensive capital, with a median house price above $1 million. This milestone has been driven by migration, tight supply and major infrastructure ahead of the 2032 Olympics. Investors are also targeting value-rich suburbs.

Investor interest in other regions is also gaining momentum. In NSW, the market remains “cautiously optimistic”, buoyed by interest rate cuts and selective demand in Sydney and regional locations. A-grade assets are performing well, while regional towns with infrastructure and lifestyle appeal continue to offer long-term investment potential.

In addition, Perth continues to stand out as a growth leader, with extreme supply shortages, rising population and off-market activity fuelling price growth. Demand is extending from houses to well-located units.

Adelaide, too, is seeing sustained interest, particularly in coastal and inner suburbs, thanks to low vacancy rates, infrastructure investment and relative affordability. Meanwhile, Melbourne’s outer suburbs and regional centres like Geelong are showing signs of renewed confidence as population growth and affordability improve.

For investors, these trends suggest it is time to reassess asset selection and focus on markets with strong fundamentals, especially those that are undersupplied, infrastructure-rich and in proven demand.

Whether you’re refinancing or expanding your portfolio, Clever Finance can help you structure loans that align with your rental income and long-term strategy. We also work closely with lenders who understand investment finance. Book a call with us to discuss your goals and needs.