Forecasters had been betting on a calmer year for tenants, expecting rent rises to settle down and roughly match inflation while vacancy rates slowly edged higher. That softer outlook followed signs in late 2025 that the intense rental squeeze was finally easing a little, giving both households and policymakers hope that the worst of the pressure was over.
Fresh figures now point the other way, with average rents across Australia climbing by more than 5% over the past 12 months and increases in Sydney running even hotter. In that city, new research from a property data group shows rents rising about 7.4% year on year, roughly double the current inflation rate. The rebound comes at an awkward time, as tenants are being hit with steeper weekly housing costs just as many investors are juggling higher interest repayments and softer property prices. This is creating a mismatch between what landlords need to cover their loans and what renters can realistically afford.
This renewed upswing in rents looks likely to deepen the affordability gap for many households, even as it appears to signal stronger returns for some property investors. If vacancy rates stay low and demand for accommodation remains high, rental markets in major cities could stay under pressure for longer than expected, forcing governments, developers and investors to rethink how quickly new housing can be delivered. At the same time, rising borrowing costs for landlords seem to be limiting how much new rental supply comes on stream, making it harder to see an easy or immediate fix.
