Data shows rental tenants have hit breaking point

Australia's rental market is finally losing steam even as rents remain at record highs.

It is the rapidly emerging disconnect which experts say could suggest tenants are now being pushed to the brink as rents flatline and even fall across most of the major capitals.

New data from Domain shows capital city house rents were unchanged at $700 per week over the September quarter, while unit rents rose by 1.5 per cent despite very low levels of rental properties available on the market.

That slowdown is challenging the long held relationship between tight rental supply and growth, according to Domain's chief residential economist Nicola Powell.

"Tenants' ability to absorb further increases is really the dynamic that is limiting further rental growth," she told The Business.

"There's almost a disconnect now between where vacancy rate sits and what is occurring for rental growth."

Lack of supply isn't translating into rent rises

Dr Powell said although it is still "a landlords' market" in all major capitals and regional areas, the severe supply shortage "isn't necessarily transferring into rental increases" as tenants hit their ceiling.

Rents for houses are at or near record highs with Sydney, Darwin and Perth the most expensive cities to live in.

But most of that growth occurred earlier in the year.

The new data from Domain found that rents in Melbourne, Brisbane, Perth and Adelaide had flatlined over the past three months.

Housing rents actually fell in Sydney and Canberra by $5 and $10 respectively, erasing gains in June.

Only Darwin and Hobart bucked the trend across the capital cities in Domain's dataset, recording rises of 5.3 per cent and 1 per cent respectively in houses in the last quarter.

Although the market is slowing with the national vacancy rate rising by 0.1 percentage points to rest at 1 per cent, it is still much tighter than it was a year ago.

Renters compromise to avoid higher rent

Cameron Kusher of Kusher Consulting, an independent property economist, said renters were finding other ways to survive as the market squeezes them for all they are worth.

"Because rents have increased so much over the last few years, what people are doing is they're renting in a less ideal location," he said.

"So they're opting for a cheaper rental, maybe not ideally where they want to live but basically a trade-off that they're having to make."

Other ways include share housing or adult children staying at home longer.

Migration cuts floated to curb rent rises

It comes as One Nation released new modelling on Wednesday for its migration plan, claiming it could save Australian renters almost $3,000 a year.

The minor party has pledged that, if elected, it would cut 750,000 temporary visas over three years which could reduce rental inflation by 6.5 per cent.

"I don't know that that's enough to significantly improve rental affordability given how much rents have increased over recent years," Mr Kusher said of the policy. 

"But I feel like, at this point, renters would probably take any win that would lower their rent."

He also said that changes in this year's budget that made property investment less attractive were still flowing through the system.

But at this stage, Mr Kusher said it does not seem to be causing the massive rise in rents as was initially feared.