Australia’s rental shortage has worsened with vacancy rates falling to a record low in September.
Australia’s soaring migration intake pushed demand higher, while property investors exited the market amid high interest rates.
PropTrack data shows the national rental vacancy rate sank 0.06 percentage points in September to reach a fresh low of just 1.06 per cent.
The share of rental properties vacant has almost halved since the onset of the Covid-19 pandemic in March 2022, as the rate of new builds eases and Australia’s population grows at its fastest pace in more than a decade.
Tenants are already struggling with surging rental costs, with recent monthly inflation data, released by the Australian Bureau of Statistics, showing rents jumped at a blistering pace of 7.8 per cent in the year to August.
PropTrack senior economist Anne Flaherty said a combination of surging population growth, diminishing household sizes, more investors selling properties, and the slowdown in building commencements and approvals had caused rental availability to fall.
“Vacancy is now sitting well under 1 per cent in three of Australia’s capital cities. More markets are expected to fall below 1 per cent over the coming year as demand continues to grow,” he said.
Rents are predicted to rise even further, Ms Flaherty said, particularly in capital cities.
“There’s a very real possibility that vacancy rates could fall below where they are at the moment and it means that rents are very likely to continue to rise very rapidly around the country.”
Ms Flaherty added that the RBA’s round of interest rate increases had reduced the amount first-time homebuyers could borrow, while house prices had continued to climb.
“It’s become the most difficult it’s ever been to break out of the rental market and become a homeowner. Affordability is actually at the worst levels that we have seen it,” she said.
Rental conditions deteriorated in Melbourne and Sydney over September, with the vacancy rate dropping to 1.15 per cent and 1.18 per cent respectively.
Darwin had the highest rental vacancy rate at 1.8 per cent, while conditions in Brisbane defied the broader deterioration to rise but by just 0.02 percentage points.
The largest drop in vacancy rates was recorded in Hobart, which fell by 0.13 percentage points, to 1.4 per cent, while ACT dropped 0.11 percentage points to 1.62 per cent.
Perth and Adelaide remained the tightest markets, with vacancies recorded at 0.71 per cent and 0.65 per cent.
CoreLogic data released last week showed national median rents sat at $589. Sydney maintained its position as the most expensive capital city rental market, with median dwelling rents at $726 per week. Hobart had most affordable market with median rents at $529 a week.
However, principal research fellow at the ANU’s Centre for Social Research and Methods, Associate Professor Ben Phillips, said that while advertised rents had increased sharply, conditions across the rental market more broadly were not quite as bad due to low unemployment and rising rental support among low-income households.
“When you look at all renters, you tend to find that rent costs to incomes have come down in recent years,” he said.
“Obviously, if you‘re new into the market or you want to shift houses as a renter, that’s going to be challenging because new rents have certainly increased sharply.”
Professor Philips warned that while rental costs as a proportion of total incomes had lowered in the last few years, they would likely increase in the near term.
“The projection forward probably is things are going to get worse before they get better,” he said.
The growing challenge of securing a rental property has coincided with a rise in Australia’s population by 563,200 people – including 454,400 new migrants – in the year to March.
Over the same period, new dwelling approvals tumbled by 17.3 per cent according to ABS figures.