Will rents keep going up in Australia in 2026?

Rental market conditions in 2026 remain tight in major cities, with vacancy rates below 2% in Sydney, Melbourne, and Brisbane. Interest rates are still elevated compared to 2020-2021 lows, and insurance and maintenance costs continue to rise. These factors support continued upward pressure on market rents. Whether any specific rent increase is reasonable still depends on what comparable properties are renting for in your postcode, not on your landlord's costs.

Did the May 2026 budget change negative gearing rules for existing landlords?

No. The May 2026 federal budget negative gearing changes apply only to new residential property purchases made after the budget announcement. Landlords who already own investment properties retain full negative gearing deductions. The change that does apply broadly is the reduction of the capital gains tax discount from 50% to 25% on new purchases. Existing landlords citing the budget as grounds for a rent increase are using a policy that does not apply to them.

Can my landlord raise my rent because their insurance or council rates went up?

A landlord can issue a rent increase notice at any time, subject to state notice periods and frequency limits. But in every Australian state, the legal test for whether a rent increase is excessive is based on market rent, not the landlord's costs. Rising insurance, council rates, or maintenance costs are not grounds for a rent increase at a tribunal. The relevant question is whether the proposed rent reflects what comparable properties in your area are renting for.

Are rent increases caused by interest rates?

There is a correlation but not a direct or immediate one. Higher interest rates increase mortgage repayments for leveraged landlords, which gives them motivation to raise rents. But a landlord's mortgage costs are not a legal justification for a rent increase. Tribunals assess increases against market rent, not landlord costs. Whether rates are rising or falling, the relevant benchmark for your counter-offer is the landlord's cost of replacing you, not their financing costs.

What is the main reason rent is increasing in Australia in 2026?

The most direct driver is low vacancy rates in major cities, which means landlords face less competitive pressure to hold rents down. Secondary factors include elevated interest rates, rising insurance and maintenance costs, and upward pressure on market rents from sustained high demand. The May 2026 budget changes primarily affect new investors, not the majority of existing landlords.

Does knowing why rents are going up help me negotiate my rent increase?

Only indirectly. Understanding market pressures helps you assess whether your proposed increase is in line with comparable properties in your postcode. It does not change the negotiation frame itself. The most effective counter-offer is still based on the landlord's replacement cost: what it will actually cost them to find a new tenant if you leave. That number has not changed because of interest rates, the budget, or insurance premiums.

Why Rent Is Going Up in 2026: The Real Pressures Behind Australia's Rental Market

If your rent went up this year, you are not imagining it. There are genuine pressures on the rental market in 2026: elevated interest rates, rising insurance and council costs, tight vacancy in major cities, and the ripple effects of the May budget. Landlords have real reasons to push rents up. Most of them will.

What those pressures do not change is the negotiation. Understanding why rents are rising is useful context. It is not a reason to accept whatever number arrives in the letter.

Quick summary

Multiple real pressures are converging on landlords in 2026: rates, costs, and budget changes
The May 2026 budget negative gearing changes apply only to new investors; most existing landlords are exempt
Low vacancy in major cities is the strongest structural driver of market rent increases
In every Australian state, tribunals assess rent against market rate, not landlord costs
The negotiation frame stays the same regardless of what is happening in the broader market

The pressures that are genuinely real

This is not the year to dismiss landlord cost pressure as pure convenience. Several things converged at once.

Pressure	What changed	Realistic impact on landlord costs	Who it affects
Interest rates	Rates remain elevated vs the 2020-2021 lows; cuts have been slow	Significantly higher mortgage repayments for variable-rate or recently refinanced landlords	Leveraged landlords on variable or expiring fixed rates
Landlord insurance	Premiums rising 10-20% per year in many markets since 2023	$300 to $800 extra per year for a typical investment property	All landlords
Council rates	Rising in line with property values across major cities	$200 to $500 extra per year	All landlords
Maintenance and repairs	Trades and materials costs rose sharply through 2023-2025	$200 to $600 extra per year depending on property age	All landlords, particularly older properties
May 2026 budget: CGT	Capital gains tax discount cut from 50% to 25% on new purchases	Reduces after-tax return on future sale; does not affect current rental cash flow	Applies to all new purchases; existing owners retain original discount on existing properties
Vacancy rates	Below 2% in Sydney, Melbourne, and Brisbane	Market rents rising; less competitive pressure on landlords to hold rents down	Tenants in major city markets

* Figures are estimates based on available market data. Individual circumstances vary.

What the May 2026 budget actually changed (and for whom)

The May 2026 federal budget made two changes relevant to investment property:

Negative gearing: Changes apply only to new residential property purchases made after the budget announcement. Existing investment properties retain full negative gearing deductions. The overwhelming majority of current landlords are not affected by the negative gearing changes.
Capital gains tax discount: Reduced from 50% to 25% for new property purchases. This affects the after-tax return when a property is eventually sold, not the current rental cash flow.

If your landlord cites the budget as the reason for your rent increase, ask which change applies to their situation. If they own an existing property and have not purchased recently, the negative gearing changes do not apply to them. For a detailed breakdown of how the budget changes work and who they actually affect, see our explainer on the 2026 negative gearing changes.

The strongest driver: vacancy rates

Of all the pressures listed above, vacancy is the one that most directly supports market rent increases. When properties are in short supply, landlords face less pressure to price competitively to attract tenants. Sydney, Melbourne, and Brisbane have all recorded vacancy rates below 2% at various points through 2025 and into 2026.

This matters because market rent is the legal benchmark tribunals use to assess whether a rent increase is excessive. If comparable properties in your postcode are genuinely renting for more than they were 12 months ago, that shift is real and your landlord can point to it at a tribunal.

It does not mean you should accept the increase without question. It means you need to check the actual market data for your postcode before you respond. NSW tenants can use the NSW Rent Check tool for postcode-level data. For other states, check current listings on Domain and REA for directly comparable properties.

What none of this changes

Market pressures are the backdrop. They are not the negotiation.

In every Australian state, the legal test for whether a rent increase is excessive is based on market rent for comparable properties, not on your landlord's costs. Rising insurance premiums, higher council rates, and increased mortgage repayments are not factors that a tribunal weighs when assessing your increase. They are context. They are not justification.

The number that actually matters in your negotiation is not how much your landlord's costs went up. It is what it would cost them to replace you:

Vacancy loss while the property sits empty: typically 2 weeks rent
Reletting fee charged by the agent: 1 to 2 weeks rent
Advertising costs: $200 to $400
Repairs and cleaning between tenancies: $300 to $800

That total, typically $2,000 to $5,000 or more, has not changed because rates are elevated or because insurance went up. It is still the financial case for keeping you over replacing you. For the detailed argument, see our post on the RBA rate rise and rent increases.

See your landlord's replacement cost

Enter your current rent and the proposed increase. The calculator works out what it would cost your landlord to replace you and gives you three counter-offer tiers you can justify with actual numbers.

Calculate my counter-offer

How to use this in your negotiation

The most effective counter-offer is not "I know things are tough, but I'd like to negotiate." That framing hands all the leverage back. The most effective counter-offer is: "Here is the specific financial case for keeping me over finding someone new."

Market pressures are useful in one specific way: they can tell you whether the proposed rent is in line with comparable properties in your area. If the proposed rent is already at or below the median for your postcode, your negotiation will be harder. If it is above median, you have a strong second argument alongside the replacement cost case.

For the full negotiation process, see our guide to negotiating a rent increase in Australia. To assess whether your specific increase is reasonable before you respond, see is my rent increase reasonable?

The bottom line

Yes, rents are going up. Yes, there are real pressures on landlords in 2026. None of that makes your specific increase non-negotiable.

The market gives your landlord the motivation to push rents up. It does not give them the right to push them to any number they choose. The negotiation is still available. The frame is still the same. The replacement cost still applies.

"Everything is going up" is an observation, not a justification. Treat it the same way you'd treat "the market has moved": acknowledge it, then redirect to the number that actually decides the outcome.

Ready to run the numbers?

The calculator takes 30 seconds. Enter your rent and the proposed increase, and it will show you the replacement cost and a counter-offer range you can actually defend.