As 2025 comes to a close, Australia’s rental market has continued to demonstrate resilience, shaped by a combination of demographic trends, supply constraints, and evolving tenant expectations. Sydney and Melbourne remain the focal points of national rental dynamics, reflecting both the challenges and opportunities for investors, developers, and renters alike.
Sydney: Tight Supply and Sustained Demand
Sydney’s rental market continued to experience strong demand throughout 2025:
- Vacancy Rates: Core suburbs maintained low vacancy rates, often below 2%, highlighting tight supply conditions across both inner-city and established suburban areas.
- Rental Growth: Median rents in Sydney increased steadily, particularly in high-demand areas such as Eastern Suburbs, Inner West, and lower North Shore, reflecting ongoing affordability pressures.
- Tenant Preferences: There is sustained interest in professionally managed, amenity-rich rental options, a trend reinforcing the value proposition of BTR and premium rental stock.
Melbourne: Stabilising with Select Growth
Melbourne’s rental market saw a mix of stabilisation and growth:
- Vacancy and Absorption: Inner-city and middle-ring suburbs like Southbank, Docklands, and Toorak continued to experience low vacancies, while outer suburbs saw moderate absorption improvements.
- Rental Movement: Median rents increased, albeit at a slower pace than Sydney, reflecting broader affordability pressures and the influence of new supply coming online.
- Demand Drivers: High-quality, well-located rental properties with good amenities remain highly sought after, particularly among young professionals and downsizers.
Sector wide Insights
Across Australia, the rental market exhibited several key trends in 2025:
- Supply Constraints Continue: Low levels of medium-to-large-scale rental development in major cities have sustained competitive conditions for tenants and consistent yields for investors.
- Professional Management Matters: Demand for professionally managed, modern, and well-located properties continues to underpin investor confidence, aligning closely with BTR principles.
- Affordability Pressure: While high-end markets have remained robust, affordability challenges persist, highlighting the ongoing role of policy, planning, and new delivery models in addressing rental housing needs.
Summary
2025 has confirmed that Sydney and Melbourne remain the nation’s rental market bellwethers. Tight supply, sustained demand, and evolving tenant expectations continue to create opportunities for BTR, institutional investors, and developers seeking long-term, resilient returns.
