The state of the rental market, October 2026: vacancies rise to 1.4%, unit rents fall and yields reach 3.85%

The national rental vacancy rate rose to 1.4% in September, according to SQM Research, and unit asking rents fell 1.6% in a month. At the same time the cash rate has climbed to 4.60%, home values have fallen for six straight months and gross yields have reached 3.85%, the highest since August 2019. For landlords, the rental market is easing just as holding costs hit a 15-year high.

This is the October issue of The Weekly, our monthly read on the numbers that move landlords' cash flow. Everything below is as at 14 October 2026 and drawn from the RBA, ABS, ATO, Cotality and SQM Research.

1.4%

The numbers that matter this month

Rates: 4.60% and a November decision still open

The Board raised the cash rate target by 0.25 percentage points to 4.60% on 29 September, effective the next day. It was a unanimous decision and the fourth rise this year, after February, March and May, taking the cash rate a full percentage point above where 2026 started. We covered the decision and what it costs on a typical investment loan in our report on the September rise.

The minutes of that meeting add some useful detail for property owners. Members noted that established housing prices had continued to fall more quickly than expected and that new housing loan commitments had dropped sharply, mainly in investor lending. Scheduled mortgage payments had risen to about 10% of household disposable income, close to their 2024 peak.

Members did weigh the case for waiting, mainly the risk that the slowdown turns out larger than expected. They judged the inflation risks more pressing. At the time of the meeting, market pricing implied roughly another 0.15 points of increases by the end of the year, which is the market saying a fifth rise is possible but not certain.

The data since then has not helped. The ABS monthly CPI, released the day after the decision, showed headline inflation rising to 4.0% in the year to August, up from 3.5% in July. Trimmed mean inflation held at 3.6%. Electricity prices were up 13.2% over the year, mainly because Commonwealth rebates have ended.

The ABS releases September CPI on 28 October, which completes the September quarter. That is the last major inflation figure before the Board meets on 2 to 3 November.

What lenders are charging investors

The RBA's F6 lending rates table, updated on 8 October, shows the average variable rate on outstanding investor loans at 6.5% in August 2026, unchanged since May and up from 5.8% in January. New investor variable loans were written at an average of 6.4%. Those figures predate the September rise. If lenders pass it on in full, as they did the earlier three, the outstanding average would sit around 6.75%.

What 4.60% means for your cash flow

Using the same example as last month: a $600,000 investor loan, which is 80% of a $750,000 property. At Cotality's national gross yield of 3.85%, that property earns about $28,875 a year in rent, or roughly $555 a week and $2,406 a month, before expenses.

At 6.75% interest-only, interest alone runs about $969 a month above the gross rent. That is slightly better than last month's $1,006 because the yield has risen, but that gain is small next to the extra $475 a month in interest compared with January's average investor rate. Council rates, insurance, strata, maintenance, management and land tax all come on top.

These figures are an illustration only. Your own position depends on your rate, loan structure, offset balance, tax rate and actual rent.

Vacancies are rising, led by Sydney and Melbourne

SQM counted 42,290 vacant rentals in September, up from 41,039 in August. At 1.4%, the national rate is the highest since December 2025 and well above the 1.0% low reached in March this year.

View data · Source: SQM Research national vacancy series

Month	Vacancy rate
Sep 24	1.24
Oct 24	1.20
Nov 24	1.37
Dec 24	1.55
Jan 25	1.04
Feb 25	1.26
Mar 25	1.13
Apr 25	1.29
May 25	1.24
Jun 25	1.28
Jul 25	1.24
Aug 25	1.24
Sep 25	1.18
Oct 25	1.19
Nov 25	1.27
Dec 25	1.44
Jan 26	1.24
Feb 26	1.14
Mar 26	1.04
Apr 26	1.16
May 26	1.24
Jun 26	1.29
Jul 26	1.34
Aug 26	1.35
Sep 26	1.39

The split between the big cities and the rest is getting wider. Sydney's vacancy rate has risen from 1.3% to 1.8% in a year, and Melbourne's is now the highest of the capitals alongside Canberra.

Source: SQM Research, vacancy rates for September 2026 and combined advertised rents for the 30 days to 12 October 2026.

Cotality's separate vacancy measure tells the same story at a higher level. Its national rate reached 2.0% in September, up from a record low of 1.5% in February and the highest since January 2025, though still well below the pre-COVID decade average of 3.3%. Cotality thinks some of the extra vacancy comes from renters forming larger households to cope with stretched affordability, rather than from new supply.

Houses and units are heading in different directions

The most telling number this month is the gap between property types. SQM found national house asking rents rose 1.6% in the 30 days to 12 October, while unit rents fell by the same amount. Unit rents fell in seven of the eight capitals.

Over the year, combined asking rents are still 7.6% higher, with houses up 8.4% and units up 6.3%. The capital city average fell 0.1% over the month and is 5.1% higher than a year ago.

SQM's Louis Christopher pointed out that some of the strength in houses is the usual spring lift, and said the more telling signal is in units, "where tenants may finally be seeing some relief." Sydney shows it most clearly: house asking rents rose 2.3% to $1,159.28 a week, while unit rents fell 1.0% to $749.18.

Slower-moving measures confirm the trend. Cotality's rent index rose 0.3% in September in seasonally adjusted terms, the smallest monthly rise since May 2025, taking annual growth down to 5.5%. The ABS measure of rents in the CPI, which follows existing tenancies rather than new listings, rose 3.6% in the year to August and has not moved from that pace since May.

None of this means rents are falling across the board. In the smaller capitals, with vacancy below 1%, tenants have few options. Darwin asking rents are up 13.9% on a year ago and Hobart's 9.5%. Brisbane is flat for the month but 7.2% higher over the year.

Values are down 5.2% from the peak, and yields keep climbing

Cotality's national home value index fell 1.1% in September, the sixth monthly fall in a row. National values are now 5.2% below the March peak and flat over the year, with a national median dwelling value of $899,236.

The fall has spread. Every capital except Darwin recorded a decline in September, and Cotality found 97% of capital city suburbs fell in value over the three months to the end of the month. Brisbane had the sharpest monthly fall of the capitals at 1.5%, just ahead of Sydney at 1.4%. Sydney is now 8.6% below its February peak.

Source: Cotality Home Value Index, results as at 30 September 2026.

Buyers are thin on the ground. Cotality estimates home sales over the past three months were 19.1% lower than a year earlier. Across the combined capitals, new listings were 9.2% lower than a year ago but total stock on the market was 23.1% higher, because homes are taking longer to sell: a median of 39 days, against 23 days a year ago.

Falling values and rising rents have pushed the national gross yield to 3.85%, the highest since August 2019. Combined capital city yields are around 3.7% and regional yields 4.3%, ranging from 3.4% in Sydney to 6.5% in Darwin. Cotality noted that even with yields rising, opportunities for neutral or positive cash flow remain low because of interest, insurance, maintenance and strata costs.

Cotality also names the Budget tax changes as a factor. It said the negative gearing and CGT changes announced in May have seen a sharp reduction in investor demand. The ABS lending figures for the September quarter, due on 11 November, will show how far investor borrowing has fallen since June's 10.2% drop.

Tax returns are due on 2 November

If you lodge your own return, the usual deadline is 31 October. This year 31 October is a Saturday, and the ATO says that when it falls on a weekend, the due date is the next business day. That makes it Monday 2 November 2026 for 2025-26 returns.

If you would rather use a registered tax agent, the date that matters is 31 October. The ATO has told agents that new clients must be added to their client list by 31 October, not the next business day. Agents generally have later lodgement dates for their clients, but only once you are on their books.

For the rental schedule, the new negative gearing rules do not apply to your 2025-26 return. Our guide to rental property tax deductions covers what you can claim this year, including the interest apportionment mistake the ATO keeps finding.

Dates to watch

• 28 October: ABS CPI for September, completing the September quarter.
• 31 October: last day to get onto a tax agent's client list for the 2025-26 return.
• 2 November: self-lodged 2025-26 tax returns due.
• Early November: Cotality's home value index for October.
• 2 to 3 November: RBA Monetary Policy Board meeting, with the decision at the end of the second day.
• 11 November: ABS lending indicators for the September quarter.
• Mid-November: SQM vacancy rates for October.

What this means for landlords

1. Budget at 7.0%. The Board has not ruled out another rise, and the September CPI could tip it either way. On a $600,000 interest-only loan, 7.0% is $3,500 a month. If that breaks your buffer, talk to your lender or broker before 3 November.
2. Price renewals to your property type, not the headline. If you own a unit in Sydney, Melbourne or Canberra, the market has turned in tenants' favour this spring. A modest increase, or none, that keeps a reliable tenant usually beats a vacancy that takes weeks to fill. House owners in the same cities have more room, but check comparable listings first.
3. Watch days on market for your rental listing. SQM counts a property as vacant after three weeks on the market. If your listing passes that point, the asking rent is probably too high for the current market.
4. Don't sell into the downturn because of the tax changes alone. Gains up to 1 July 2027 keep the 50% discount whenever you sell, as we explain in the CGT changes for landlords. With homes taking 39 days to sell in the capitals and buyers scarce, selling now to beat a 2027 change can cost more than it saves.
5. Lodge, or book your agent, now. If you lodge yourself, you have until 2 November. If you want an agent, contact them before 31 October. Gather your interest statements, agent statements and repair invoices first, and keep them for at least five years.
6. Check the rules with your state regulator before changing rent or lease terms. Some states have rental law changes taking effect this spring. Victoria's latest round started on 13 October, which we covered in last month's issue.