Cotality's latest Quarterly Rental Review published Friday shows national gross rental yields rose to 3.85% in September, up from 3.61% a year earlier.
The increase comes as national rents rose 0.5% over the September quarter, slower compared to the 1.6% growth recorded in June and 2.1% in March.
Annual rental growth also eased from 5.9% to 5.5%, taking the national median rent to $713 per week.
At the same time, the national vacancy rate rose to 2.1%, its highest level since January 2025.
Rental yields up but new investors struggle to break even
Combined capital city yields also rose from 3.40% to 3.70% over the year.
Despite this, Cotality research director Tim Lawless warns that stronger yields don't necessarily translate into stronger investment returns.
"Even with higher gross rental yields, new investors to the market will find it hard to find an investment property with a positive, or even neutral cash flow outcome, due to high holding costs," Mr Lawless said.
Mortgage rates for new investor loans are currently averaging in the mid-to-high 6% range, while higher labour and material costs are flowing through maintenance expenses.
The Cotality report notes the slowdown in rental growth appears to be driven more by weaker demand than a meaningful increase in housing supply.
"Even with the high levels of investor lending throughout much of 2025, supply constraints persist, so the recent slowdown in rental growth and rise in vacancies is likely to be more about demand adjusting than a significant increase in rental supply," Mr Lawless said.
High rents reshape households
Cotality's latest findings also point to growing affordability pressures, with renter households dedicating about 34% of their pre-tax income to rent in June, the highest level on record.
Over the last five years, unit rents were up 44.3% or $208 a week and houses up 36.6% or $195 a week.
"Renters are reaching an affordability ceiling," Mr Lawless noted.
Stretched rental affordability and broader cost-of-living pressures are prompting renters to share accommodation, stay with family for longer or seek cheaper housing options.
That said, Mr Lawless expects rental growth to continue slowing even though vacancy rates remain below their long-run average.
"Rents have risen substantially faster than incomes over the past six years, while cost-of-living pressures are likely to remain elevated," he said, adding, "Rental growth appears to have reached, or is close to, a ceiling."
Where rents fall and where it surges
Sydney recorded the only quarterly decline (down 0.4%) in rents across the capitals, its first quarterly fall since December 2024.
Darwin posted the strongest growth nationally, with rents increasing 5.8% over the quarter and 11.6% in the year.
Its median dwelling rent has increased to $774 a week, behind Sydney's $843 and Perth's $798.
Rents rose 1.7% in Adelaide and 1.3% in Brisbane for the period.
Canberra and Hobart were broadly flat at 0.1% and 0.2%, respectively.
Regional markets regained the lead in rental growth during the September quarter, with rents rising 0.8%, twice the 0.4% increase across the combined capitals.
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