Investor Insights
The rental market that has propped up investor returns for three years is starting to turn. SQM Research's September 2026 data shows the national vacancy rate edging up to 1.4 per cent from 1.3 per cent in August, with 42,290 dwellings vacant, and unit rents falling in seven of the eight capital cities. Cotality's rental review points the same way, with rent growth slowing sharply through the September quarter.
None of this signals a rental collapse. But for investors carrying loans at today's rates, and for anyone planning to refinance or buy another property, the direction of travel matters. Lenders assess rent, and a softer rent line changes the serviceability maths.
SQM Research reported the national vacancy rate at 1.4 per cent for September, up from 1.3 per cent in August, with Sydney at 1.8 per cent. SQM's commentary linked the softer apartment rents, particularly in Sydney, to a cooling jobs market. SQM's measure is not directly comparable with Cotality's or Domain's, which use different methodologies.
Cotality's September rental review has national vacancy at about 2 per cent, its highest since early 2025, and rent growth of 0.5 per cent over the quarter compared with 1.6 per cent in June. Annual rent growth eased from 5.9 per cent to 5.5 per cent, and the national median rent sits at $713 a week. REA Group separately recorded a record median advertised rent of $675 a week, up 1.5 per cent over the quarter.
| Measure | Latest reading | Source |
|---|---|---|
| National vacancy rate (September) | 1.4%, up from 1.3% | SQM Research |
| Vacant dwellings nationally | 42,290 | SQM Research |
| Sydney vacancy rate | 1.8% | SQM Research |
| Capitals with falling unit rents | 7 of 8 | SQM Research |
| Rent growth, September quarter | 0.5% (June quarter 1.6%) | Cotality |
| Annual rent growth | 5.5%, down from 5.9% | Cotality |
| National gross rental yield | 3.85% | Cotality |
| Tightest capital vacancy (Adelaide) | 1.4% | Cotality |
The softness is concentrated in apartments. Apartments are where rent pressure is easing fastest, and tenants who stretched to pay higher rents are increasingly sharing, a trend flagged in recent commentary on rental affordability. Houses, where supply remains scarcer, have held up better, and Adelaide still has the tightest vacancy of any capital at 1.4 per cent on Cotality's measure.
For investors, the practical point is that a national average hides wide differences. A well-located house in a tight market and a unit in a building with several competing listings are being assessed by tenants, and by lenders, quite differently.
Most lenders count only 75 to 80 per cent of gross rent as assessable income. If the rent on your property falls, so does the figure the lender uses. Here is an illustrative example for a unit renting at $550 a week:
| Scenario | Weekly rent | Annual rent | Assessed at 80% |
|---|---|---|---|
| Current rent | $550 | $28,600 | $22,880 |
| Rent falls 5% | $522.50 | $27,170 | $21,736 |
| Difference | -$27.50 | -$1,430 | -$1,144 |
On its own, $1,144 of assessed income is modest. But lenders also apply an interest rate buffer of three percentage points above the actual rate, so with the cash rate at 4.60 per cent, every dollar of income is being tested against a high hurdle. Investors with several properties can find the effect compounds.
A national gross yield of 3.85 per cent is the highest in more than seven years, but it still sits well below current investment loan rates. Investors are leaning on tax treatment and long-run capital growth to carry the gap, which makes serviceability and cash flow buffers more important than the headline yield.
Stress test cash flow against a lower rent and a higher rate. If the Reserve Bank lifts the cash rate again on Melbourne Cup Day, 3 November, repayments on an $800,000 investment loan will rise further while rents are flat or falling in some segments.
If you plan to keep your current home as a rental when you buy your next, the lender will assess the rent at a shaded figure. A broker can check which lenders apply the most favourable shading before you commit to a purchase.
Refinancing to a sharper rate is the most direct lever on cash flow. Lenders are competing hard for investor refinances with strong equity and low loan-to-value ratios, and a structure review at the same time, such as an offset account or a split between fixed and variable, can reduce the strain. The Mankin Finance team reviews this regularly for clients Australia-wide.
Compare loan structures side by side, including principal and interest versus interest-only and fixed versus variable.
The next signals are Cotality's October home value index, due at the start of November, and the RBA's decision on 3 November. If vacancy keeps lifting while the cash rate climbs, expect lenders to look harder at the rental assumptions behind investor applications. Investors with equity in their existing properties are generally better placed to act early than those waiting for conditions to ease.
Not directly. Vacancy affects rental income, while value is driven by buyer demand, interest rates and supply. A vacancy rate of 1.4% on SQM Research's measure is still tight by historical standards. The risk is greater for owners of units in markets with large new supply, where rents can soften while borrowing costs stay high. A broker can stress test your cash flow at different rent and rate levels.
Most lenders count only 75% to 80% of gross rent as assessable income, which allows for vacancy, fees and maintenance. If you refinance or buy another property, the lender uses the rent in your current lease or a valuer's market estimate. If rents on comparable properties have fallen, a lower figure can reduce your borrowing power slightly. Policies differ between lenders, so the choice of lender matters.
Options include reviewing the rate with your lender, refinancing to a sharper rate, moving part of the loan to interest-only for a defined period, using offset balances, or restructuring debt across properties. Each choice has trade-offs such as higher lifetime interest or fees, so it is worth modelling the numbers before acting. This is general information only and not advice for your situation.
Disclaimer: This article is general information only and does not constitute financial, mortgage, or credit advice. Figures are drawn from SQM Research, Cotality and REA Group releases and are illustrative where noted. Before making any changes to your loan structure or investment strategy, speak with a qualified mortgage broker or financial adviser who can assess your situation. Mankin Finance Pty Ltd holds Australian Credit Licence 389087.
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