Australian home values have fallen for six straight months and now sit 5.2% below their March 2026 peak (Cotality, 2026). Rents have kept rising, up 5.5% over the year to September (van Onselen, 2026). When prices fall and rents rise, rental yields move, and that changes the maths for investors and tenants.

What is happening to rents in Australia?

Rents are still climbing, but more slowly. Cotality’s September figures show national rents rose 0.3% for the month in seasonally adjusted terms, the smallest monthly rise since May 2025, and the annual rate eased to 5.5% (van Onselen, 2026).

The national vacancy rate rose to 2%, up from a record low of 1.5% in February 2026 and the highest level since January 2025 (van Onselen, 2026).

The longer view matters. National rents rose 40.6% over the five years to June 2026, adding $204 a week to the typical rental bill (Rents hit fresh highs, 2026).

Why are rents and values moving in different directions?

Home values are set largely by borrowing capacity, and four rate rises this year have cut how much buyers can borrow. Rents are set by what tenants can pay and how many homes are available to rent.

The supply side is still short. Cotality’s head of research Gerard Burg said in July that the underlying supply deficit kept conditions challenging for tenants, even as quarterly growth eased (Rents hit fresh highs, 2026). Russell Investments (2026) expects the budget’s negative gearing and CGT changes to add mild upward pressure on rents in the near term.

What does this mean for rental yields?

Gross rental yield is annual rent divided by property value. When values fall and rents rise, yields rise. Cotality reported yields had begun to lift and expected them to keep moving higher across the major capitals in the near term (Rents hit fresh highs, 2026).

A hypothetical example: a $800,000 property renting for $700 a week returns a gross yield of 4.55%. If its value falls 5% to $760,000 and rent rises 5.5% to about $739 a week, the gross yield lifts to around 5.05%.

What does it mean for property investors?

Better entry yields, higher holding costs. A higher yield on purchase helps, but interest costs have risen too. Cash flow is what decides whether you can hold the property through a soft patch.

Do not assume a full year of rent. A vacancy rate of 2% is still tight, but it is rising. Budget for a few vacant weeks a year, plus letting fees and maintenance.

Tax treatment has changed. For established properties bought after budget night, rental losses can no longer offset wage income from July 2027, so pre-tax cash flow carries more weight than it used to.

Location still decides returns. Yield is one input. Land value, tenant demand and supply pipeline determine how a property performs over ten years.

What does it mean for tenants?

Relief is arriving slowly. Rent increases are smaller than a year ago, more listings are coming onto the market and the vacancy rate has lifted. That gives tenants a little more choice and some room to negotiate at renewal, particularly where a property has sat vacant.

Rents are still rising faster than inflation, however, and tenant affordability remains stretched after five years of steep increases.

Will rents keep rising?

On current data, yes, but at a slower pace. The vacancy rate and the monthly growth figures are the two numbers to watch. If vacancy keeps climbing while values fall, rent growth will likely ease further; if new supply stays weak, the floor under rents holds.

Frequently asked questions

Are rents still rising in Australia? Yes. National rents rose 5.5% over the year to September 2026, though the monthly pace has slowed.

What is the rental vacancy rate in Australia? Cotality’s national rental vacancy rate was 2% in September 2026.

Do falling house prices increase rental yields? Yes. If rents hold steady or rise while values fall, the gross rental yield increases.

This article is general information only and does not consider your personal circumstances.

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