House rental growth across Australia’s capital cities has stabilised, with new data revealing no change in combined-capital house rents for three consecutive quarters.

The first occurrence since 2019. The findings, published in the latest Domain Rent Report, highlight a potential turning point for both borrowers and lenders.

Dr Nicola Powell, Domain’s Chief of Research and Economics, attributes the stagnation to housing markets reaching an affordability ceiling.

This has implications for residential mortgage lending, as slowed rental growth may impact investor serviceability and yield-based borrowing assessments.

However, the unit market is showing stronger momentum. In the March quarter, unit rents outpaced house rents in Sydney, Melbourne, Brisbane, Canberra, and Hobart.

Although the pace of growth has moderated, both house and unit rents remain at record highs, supporting robust demand fundamentals.

Powell says in the house market, annual growth has slowed to its lowest point in nearly five years in Sydney and Perth, just over four years in Brisbane and Adelaide and just over three years in Melbourne.

Unit rental markets, while also easing, continue to demonstrate relative strength.

The March quarter marked the softest performance since 2018 in Perth, 2019 in Adelaide, 2021 in Sydney, and 2022 in both Melbourne and Brisbane.

Despite this, units remain a comparatively stronger asset class from a yield and serviceability standpoint.

Conversely, Hobart and Darwin experienced their strongest March quarter since 2022, highlighting the resilience of certain smaller markets.