Australia’s rental market forecast for 2027

By Carolyn Parrella | Published 19 October 2026

Australia’s rental market remained highly competitive through the first half of 2026. But will this trend continue in 2027?

For landlords and property investors, understanding these local and national trends may help with:

• rental pricing
• property improvements, and
• longer-term investment planning.

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Key rental market trends from 2026

2026’s rental market remained tight by historical standards, with low vacancy rates and continued pressure on affordability. Here’s a summary of key conditions from this year and why they matter for 2027.

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2027 forecast for the rental market

The 2027 rental market outlook remains uncertain. Based on current indicators, rental growth may continue at a slower pace, with conditions varying between cities, regions and individual suburbs.

Interest rates, migration policy, employment conditions and the speed of new housing delivery could all affect the market during 2027. However, any forecast is subject to change.

Rental price growth forecast

NAB’s forecast in early 2026 indicated that property professionals expected rents to rise by around 4% to 6% during the year. As vacancy rates remain low well into the second half of the year and new supply takes time to reach the market, some of that momentum could carry into 2027.

According to Oxford Economics Australia, rental growth is expected to continue in many house and unit markets through to at least mid-2027, although actual outcomes will depend on local supply, demand and affordability conditions.

But it’s also important to consider that tenants’ ability to absorb further increases may also place a practical limit on rental growth. If you’re a landlord, don’t rely just on national forecasts. Also consider:

• comparable local listings
• the condition of your property, and
• tenant affordability.

Vacancy rate outlook

The National Housing Supply and Affordability Council forecasts that 938,000 new dwellings will be built in the country over the five-year Housing Accord period, ending June 2029, a shortfall of 262,000 against the 1.2 million target.

That equates to around 165,000 to 190,000 completions a year, below the approximately 240,000 homes required annually to meet the target.

A gradual easing in vacancies remains possible if migration slows, household sizes increase or more completed projects become available. However, the existing supply shortfall means any improvement may be uneven.

Regional divergence by city

Australia is not one rental market. Conditions can be quite different between capital cities, regional centres and individual suburbs. The table below summarises the trends across multiple sources.

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These are city-level trends only. Landlords should review suburb-specific vacancy rates, advertised rents, days on market and the local development pipeline before making decisions.

Key drivers shaping 2027’s rental market

Interest rates and borrowing costs for 2027

Interest rates remain an important consideration for both existing landlords and prospective investors.

Higher borrowing costs can reduce an investor’s net return even when gross rental income is rising. Landlords may find it helpful to stress-test repayments against multiple interest-rate scenarios rather than planning around a single forecast.

Population and migration growth in 2027

Population growth is likely to remain a major source of rental demand. Australian capital cities recorded growth of 1.8% in the 2024-2025 financial year.

Overseas immigrants often rent before purchasing a home. This can produce immediate demand in locations close to:

• employment
• education, and
• transport.

Changes to migration policies could also affect vacancy rates and rental growth. These could keep the trend of high demands for rental properties in capital cities.

Housing supply shortages

Housing supply is likely to be one of the most persistent influences on the rental market in 2027. Some of the main factors that may continue to delay new housing are:

• high construction costs
• labour shortages
• financing conditions, and
• lengthy approval processes.

Property investment considerations for landlords in 2027

Rental returns and rising property costs

Low vacancy rates and higher rents may support gross rental yields. However, a higher gross yield doesn’t necessarily mean an investment is delivering a stronger net return.

Landlords may also face:

• higher mortgage repayments due to higher interest rates
• increased maintenance and repair costs
• higher property management fees
• increased council rates and strata costs, and
• higher insurance premiums.

Each property should be assessed on its net cash flow after expenses, rather than rent growth alone.

Property market risks for investors in 2027

The rental outlook may change as new economic and policy information becomes available. Here are some factors to watch:

• The timing and direction of RBA interest-rate decisions
• State-based tenancy law reforms
• Local housing approvals and construction completions
• Changes to investor lending or property taxation
• Rental affordability and tenants’ capacity to absorb increases.

Comparing the best cities to invest in Australia

There isn’t one “best” Australian city for property investment. The right market depends on factors including:

• your financial position
• investment objectives, and
• appetite for risk.

However, rental market indicators can help investors compare conditions between cities.

Some current indicators suggest Brisbane, Perth and Adelaide may have comparatively stronger population and supply drivers than some other capital-city markets, but these conditions can change and should be checked against up-to-date local data.

Meanwhile, conditions in Sydney and Melbourne vary significantly between local markets and may show more modest short-term rental growth in some areas. Individual suburbs with access to employment, transport and education, or with limited new supply, may perform differently from their broader city market.

Anyone reviewing a potential property investment should look beyond headline capital-city results and consider whether the available information is relevant to their own circumstances. The following indicators may provide a clearer view of local conditions:

• vacancy rates
• tenant demographics
• future developments, and
• the difference between gross and net yield.

This information is general in nature and is not intended to be personal financial advice. Consider seeking professional advice before making investment decisions.

Strategies to navigate the 2027 rental market

Review lease length carefully

A longer fixed-term lease may provide greater income certainty and reduce letting costs. However, it may also limit flexibility to change the rent or tenancy arrangements.

Just keep in mind that any rent review or lease term must comply with the residential tenancy legislation in the relevant state or territory.

Retain good tenants

In a rising market, it can be tempting to focus only on achieving the highest possible rent. However, a reliable tenant who looks after the property and pays rent on time may reduce vacancy, advertising and reletting costs.

Clear communication, timely maintenance and reasonable lease discussions can contribute to a more stable tenancy.

Consider value-adding improvements

Improvements that reduce running costs or make the property more comfortable may help attract and retain tenants.

Depending on the property, these could include:

• energy-efficient heating and cooling
• insulation or draught sealing
• LED lighting
• water-efficient fittings, and
• reliable internet connectivity.

However, before you complete any major work, assess the expected cost, likely tenant demand and potential rental return.

Diversify based on local fundamentals

For landlords with multiple investment properties, exposure across different locations or property types may reduce reliance on a single market, industry or tenant demographic. This is a general consideration only and may not be suitable for every investor.

However, diversification does not remove investment risk. Before making decisions, consider whether each property is consistent with your own:

• objectives
• financial position, and
• risk tolerance.

Seek professional financial advice where appropriate.

Review landlord insurance cover

Even in a tight rental market, unexpected events can occur. Depending on the policy, landlord insurance may provide cover for certain insured events, subject to applicable terms, conditions, limits and exclusions. Examples may include:

• loss of rent
• tenant-related damage
• theft
• legal liability, and
• damage caused by events such as storms or fire, including bushfire.

Policy terms, conditions, exclusions and limits apply. Review the relevant Product Disclosure Statement and Target Market Determination and consider whether the product is appropriate for you before buying or renewing cover.

Planning for a market in transition

Australia’s rental market may remain tight in 2027 if current supply and demand pressures continue. The pace of rental growth may moderate, and outcomes are likely to differ across locations. Low housing supply and population growth could continue to support demand, while higher borrowing costs and rental affordability may limit further increases.

While no forecast can account for every change in economic conditions or government policy, keeping across local market conditions can help you adapt as 2027 unfolds.

Landlord insurance can help protect against certain insured events, depending on the policy. Learn more about Terri Scheer Landlord Insurance and review the relevant product documents before deciding whether to buy or renew cover.

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