The shift in the location preferences of many house hunters due to the COVID-19 pandemic has resulted in Darwin becoming a competitive rental market.

The rental vacancy rate in Darwin continued to fall in January, hitting 0.8% from 0.9% in the preceding month, according to the latest figures from SQM Research.

The difference was more apparent on an annual basis, with Darwin reporting a vacancy rate of 3.2% in January 2020.

Asking rents in Darwin were among the highest across state capitals, particularly for houses. On an annual basis, weekly house rents increased by 27.5% to $580 while unit rents jumped by 5.8% to $393.

Caroline Deane, a solicitor from the Darwin Community Legal Service, said the current competitive nature of Darwin's rental market has resulted in tenants struggling to find long-term accommodation.

"It's low income-earners who are the ones who will have particular difficulty finding an alternative property, but it is happening across the board, to all demographics," she said in a report in ABC News.

Deane said there is a need for the Northern Territory government to create a policy for stronger tenancy laws that the ones passed as part of its COVID-19 response in April.

The legislation, Deane said, should include key policies on moratoriums on evictions and rent increases.

"At the moment, tenants in the Northern Territory are struggling to find an alternative property within 60 days, so our concern is if that period is shortened, as per the standard tenancy legislation, tenants will not be able to find alternative properties and it may increase our homeless population," she said.