Property prices may be falling across much of Australia, but that doesn’t tell the whole story for investors. Rental markets remain tight and rents are continuing to rise.
Cotality’s September Home Value Index showed national home values fell 0.9% between July and August, the fifth consecutive monthly decline. Values are now 3.6% below their March peak, with 93% of capital city suburbs recording a fall over winter.
But while property prices have softened, rents have held up strongly.
Vacancy rates remain tight
SQM Research recorded a national residential vacancy rate of 1.3% in July, unchanged from June and well below the 2–3% level generally considered a balanced market. Conditions were even tighter in Brisbane, Perth, Adelaide, Darwin and Hobart, where vacancy rates remained below 1%.
For investors, low vacancy rates can mean less time without a tenant and stronger rental demand. But as always, the headline number only tells part of the story. Conditions can vary considerably from one market to another.
Rental conditions have remained tight even as property prices have softened. Buyer demand may have eased, but the rental market is dealing with a different issue: there still aren’t enough properties available to meet tenant demand.
Where is rental growth strongest?
With so few rental properties available, rents are continuing to rise. SQM Research found national combined advertised rents were 7.2% higher over the year to August 2026, reaching an average of $698.45 per week.
Some of the strongest rental growth has occurred in the tightest rental markets. Darwin, where the vacancy rate was just 0.3%, recorded 14.1% annual combined rent growth, while Hobart, with a 0.6% vacancy rate, recorded 12.2% growth. Brisbane rents increased 8.3% over the year.
Property type matters too. Nationally, advertised unit rents increased 7.7% annually, compared with 6.8% for houses. For investors, this is a good reminder not to rely on headline numbers alone. Where you invest matters, but so does the type of property and what local tenants are actually looking for.
Why could rental conditions remain tight?
One of the biggest reasons rental conditions remain tight is simply that Australia is not building enough homes.
The National Housing Supply and Affordability Council now expects the government’s 1.2 million home target to be reached later than originally forecast, while rising construction costs continue to put pressure on new housing supply.
Recent property tax changes announced in the 2026/27 federal budget may also influence how investors approach the market, particularly as policy shifts more focus towards new housing.
From what I’m seeing, some investors are becoming more cautious about their next move. The longer-term impact on investor activity and rental supply remains to be seen, but it is another factor worth watching while rental availability is already tight.
What matters from an investor’s perspective is understanding how these changes affect your own position, rather than reacting to the policy headlines alone.
For investors, lower property prices combined with stronger rents are also starting to improve rental yields. According to Cotality, the national gross rental yield reached 3.8% in August.
That was the highest level since September 2019. But a stronger gross yield doesn’t necessarily mean a property will be affordable to hold. Interest, management fees, maintenance, insurance, rates and other costs still need to be worked through properly.
Falling prices don’t automatically mean investors should sit on the sidelines. In some markets, softer conditions can create an opportunity to buy well, particularly where rental demand remains strong and the property still stacks up on the fundamentals.
But the answer isn’t to buy simply because prices are down. The property still needs to be right, the numbers need to work and the purchase needs to fit into a clear long-term strategy.
Finding the right investment opportunity
Strong rental conditions do not make every property a good investment.
Rental income is important, but it is only one part of the decision. Investors also need to consider future housing supply, population and employment growth, the quality of the property itself and its potential for long-term capital growth.
At SAFORE, we look beyond the headline numbers. Rental income matters, but so does the market, the quality of the property and, most importantly, how the purchase fits into your broader strategy.
The aim isn’t simply to find a property with a strong rental yield today. It’s about finding the right property, in the right market, that supports your longer-term investment goals.
If you’re considering your next property investment, speak with the SAFORE team about building a strategy around your goals, financial position and longer-term plans.
