Renters may see light at the end of the tunnel in property market shift

Australia’s rental market may be giving renters a glimmer of hope despite vacancy rates hitting record lows in January 2024, according to Domain’s latest Vacancy Rates Report. National vacancy rates returned to 0.8% after December’s seasonal increase, but signs are emerging that the tide could be turning in favour of tenants with a slowdown in rental growth rates and reduced competition.

Domain’s Chief of Research and Economics, Dr Nicola Powell, highlighted the subtle yet promising changes, stating that “Vacancy rates in Sydney are back at a record low, while Melbourne, Adelaide and Perth are close to an all-time low.” She pointed to the seasonal tightening in January due to increased demand absorbing December’s supply boost. However, Dr Powell indicated optimism for renters: “The glimmer of hope for renters this year does remain as we are likely moving into a period of slower rental growth and the number of prospective tenants per rental listing is easing.” She suggested that while this has not yet impacted vacancy rates significantly, a shift could be on the horizon.

Domain’s report pinpoints varying conditions across capital cities. Sydney and Melbourne saw vacancy rates drop to 0.9%, with Sydney’s rental supply at its lowest for January, and Melbourne experiencing the first monthly decrease since September. Both cities exhibit annual trends indicating slowing rental demand. Brisbane’s vacancy rate decreased to 0.8% after the first monthly decline since September. Perth maintained a steady 0.4% vacancy rate, while Adelaide fell to a competitive 0.3%. Darwin and Hobart saw declines to 1.4% and 0.7%, respectively, and Canberra recorded the largest monthly change among the capitals with a decrease to 1.5%.

Encouragingly for renters, Dr Powell speculated on the future of the housing market, saying, “We are also likely to see some renters transitioning to homeownership with the new first-home buyer incentives in place along with a potential interest cut that will improve borrowing capacity and mortgage affordability.” She expects that a tipping point may occur this year, heralding a shift towards a more balanced rental market.

The report suggests that while vacancy rates are currently low, the overall trend points to easing competition for renters, with a hopeful transition towards a more tenant-friendly market in the coming months.

Monthly vacancy rates.

	Jan-24	Dec-23	Jan-23	Monthly change	Annual change
National	0.8%	1.0%	0.8%	↓	–
Combined Capitals	0.8%	1.1%	0.9%	↓	↓
Combined Regionals	0.8%	0.9%	0.8%	↓	–
Sydney	0.9%	1.3%	1.0%	↓	↓
Melbourne	0.9%	1.2%	1.0%	↓	↓
Brisbane	0.8%	0.9%	0.8%	↓	–
Perth	0.4%	0.4%	0.3%	–	↑
Adelaide	0.3%	0.4%	0.3%	↓	–
Hobart	0.7%	0.8%	0.5%	↓	↑
Canberra	1.5%	2.0%	1.5%	↓	–
Darwin	1.4%	1.7%	1.3%	↓	↑

City areas with the highest vacancy rates.

Rank	Sydney	Melbourne	Brisbane & Gold Coast	Perth	Adelaide
1	Dural – Wisemans Ferry (2.7%)	Macedon Ranges (2.4%)	Kenmore – Brookfield – Moggill (1.8%)	Mandurah (0.7%)	Adelaide City (0.8%)
2	Rouse Hill – McGraths Hill (2.5%)	Melbourne City (2.2%)	Gold Coast Hinterland (1.7%)	Armadale (0.7%)	Norwood – Payneham – St Peters (0.5%)
3	Pittwater (2%)	Melton – Bacchus Marsh (1.9%)	Jimboomba (1.5%)	Cottesloe – Claremont (0.6%)	Burnside (0.5%)
4	Ku-ring-gai (1.8%)	Whitehorse – West (1.8%)	Sherwood – Indooroopilly (1.5%)	South Perth (0.6%)	Unley (0.5%)
5	Blacktown – North (1.7%)	Manningham – East (1.7%)	Brisbane Inner (1.4%)	Serpentine – Jarrahdale (0.5%)	Campbelltown (SA) (0.4%)