Which city has the most affordable rents?

Adelaide has become the most affordable city in which to rent a house, according to the latest market report from Domain.

While house rents in Adelaide increased in December, the pace at which they grew was more subtle than Perth, which previously has the cheapest house rents. Over the month, house rents in Adelaide increased by 1.2% to $410. On the other hand, rents in Perth increased by 6.3% to $420.

In terms of units, Adelaide remained the most affordable city, with median rents stabilising at $340 in December.

The gains in Adelaide's house rents could indicate an already competitive rental market. The market is expected to tighten further as vacancy rates continue to shrink.

In fact, Adelaide's vacancy rate in December declined on an annual basis, down from 1.1% to 0.7%, according to the latest data from SQM Research.

"Rental supply has been limited in recent years as subdued investor activity and apartment construction were constrained compared to other cities," the report said.

Adelaide is less exposed to overseas migration, making it less vulnerable to the disruption to rental demand. The extension of the rent increase moratorium until the first few months this year would prevent tenants from moving.

The Domain report also noted that South Australia's tourism is generated from domestic travellers. This means that Adelaide will benefit from a resurgence in domestic travel when borders reopen, driving demand for short-term leases.

"This could tighten the long-term rental market further," the report said.