The new tenancy laws in Australian Capital Territory might be resulting in unintended consequences in the local housing market, with investors seemingly starting to lose interest, according to a market watcher.

The revised Residential Tenancies Act in Canberra took effect in November. Under the changes, rent increases outside fixed-term agreements are capped to one per year. The new rules also make it easier for tenants to keep pets and make minor modifications to rental properties.

One of the unforeseen consequences of the changes is the rapidly increasing rents in Canberra, said Hannah Gill, managing director at Independent Property Management. She said the rent limitations applied in November were "forcing rents up more quickly".

"We've seen a nearly $18 increase year-on-year for average rents in our portfolio. The December 2018 average was sitting at $448 and last month at $466. That's quite a significant increase year-on-year. It's the unintended consequences we were worried about," she said in a report in RiotACT.

This could suggest that landlords are pushing up rents to the maximum allowed.

Recent figures from SQM Research show that Canberra's rents for both houses and units are the second-highest across all capital cities next to Sydney. This could be attributed to the low stock of rental supply due to the weak investor activity in the market.

"Four years ago we were seeing half of the development snapped up by investors and now from what I'm seeing it's 10 to 15%," Gill said.

Vacancy rates in Canberra remained tight at 1.7% in December. While this is an improvement from the 1.1% vacancy rate recorded in the previous month, this could be due to the seasonal movement of students and some industry-specific workers, according to SQM Research.

Other housing markets are facing similar issues surrounding the changes in tenancy laws, including NSW and Queensland.

Propertyology Director Simon Pressley said the changes seem to be "heavy-handed" and could even discourage investment and push up prices.

For instance, owning a pet is also one of the heavily-discussed issues, with some changes preventing landlords from prohibiting pets under rental agreements.

"The reality is pets can cause damage to a property. The legislation can say whatever it wants about pets, but that's a fact. So I think it is completely wrong for any state government, at any time, to say, 'we're going to pass some legislation that removes the right of the asset owner to say yes or no to pets'," Pressley said in an analysis.

Pressley said boosting the engagement between landlords and tenants would be able to make the dynamics better than imposing the "heavy-handed" changes.