Renting a house in Canberra might not the best idea at the moment.

According to The Domain Rental Report for the first quarter of 2016, rents have risen in most capital cities. Canberra, in particular, has the third most expensive rental prices in the country, next only to Sydney and Darwin. Its median weekly rental price is at $470, which means that the average renter pays $70 more in Canberra than in Melbourne, despite the fact that the latter has higher house prices.

House rentals in Canberra increased by 4.4 per cent over the past year while unit rentals also rose by 1.3 per cent. On the other hand, vacancy rates in Canberra dropped from 3.1 per cent last year to only 1.5 per cent this year—the lowest residential vacancy rate in the country together with Hobart.

"Although vacancy rates held steady, they remain very low, indicating the likelihood of future rent rises in Canberra," said Andrew Wilson, chief economist of Domain.

One of the reasons why Canberra is an expensive place to rent is because of the higher incomes. "That attracts more owner-occupiers than tenants and with higher income levels, those that do come in for a rental property are looking at a higher price point," said Wilson.

In addition, there has also been a shortage of rental properties in the Australian capital, hence pushing higher the demand for mid to high-level properties.

"It's becoming a very expensive place to rent, particularly compared to the median house price."