Rental rates have surged in Sydney and Perth, which is good news for investors but bad news for tenants who are struggling with tightening budgets and cost-of-living pressures.

Rents have increased markedly in the past quarter in Sydney and Perth, driven by lower vacancy rates, both cities reaching record levels, figures from Australian Property Monitors show. Median weekly rent rose for houses (1.6 per cent) and units (0.2 per cent) across the nation.

APM senior economist Andrew Wilson said upward pressure on rents would continue in Sydney, Perth and Darwin as declining affordability reduced the capacity of prospective first-home buyers to purchase property.

“There is a shortage of properties for rent, higher populations and a lot of competition putting upward pressure on rentals over the medium term,” Mr Wilson said.

But McGrath’s head of network property management, Michael Conolly, said low unemployment and falling interest rates were making housing more affordable.

“We may see a resurgence in purchases over in the next quarter if that continues,” Mr Conolly said. “It’s still a tight vacancy market in Sydney and Brisbane. Canberra is softer because there is more stock compared to this time last year.”

The median weekly rent for houses in Sydney rose 4 per cent, APM’s data found.

Government concessions and grants on first-home purchases ended, lowering affordability and forcing would-be first-home buyers to stay in rental accommodation.

Mr Wilson said capital growth in the Sydney market was attracting investors, increasing supply.

Housing shortages driven by increasing immigration in Perth led to rental rates rises of 5 per cent in the September quarter and 15 per cent for the year. Rent on units rose 2.6 per cent in the quarter and more than 11 per cent for the year.

In Melbourne’s subdued housing market, rents were flat.

The Melbourne rental market has the highest vacancy rate of the capital cities and tenants have a wide choice of properties.

Mr Wilson said Melbourne’s vacancy rate would be exacerbated by new apartments coming on to the market. However, Barry Plant of the Barry Plant Group said Melbourne’s vacancy rate was not excessive and would probably be absorbed in the next few years.

“There is not any great concern, there may be a minor dip in terms of availability, but we have grown used to a tight market with low vacancies,” Mr Plant said.

Brisbane and Adelaide also had subdued rental markets, while reduced rents in Canberra were attributed to higher buyer activity.

Darwin’s transient workforce and housing shortage pushed rental rates higher.

Rental yield in most cities was flat except in Sydney, where it weakened slightly. Price weakness in the investment market caused yields to rise in Melbourne.