Australia’s rental market tightens as February statistics raise concerns

Australia’s rental landscape demonstrated further challenges for prospective tenants in February, reaching new levels of scarcity across the nation. A report by PropTrack highlighted a decrease in the national vacancy rate by 0.12 percentage points, bringing it down to a record low of 1.07%. This decline was observed in both capital cities and regional areas, with capital cities experiencing a more pronounced tightening, leading to a vacancy rate of 1.04%. This marks a shift from the previous trend between 2020 and 2022, during which finding rentals was more difficult outside metropolitan areas.

Sydney and Melbourne were key contributors to the tightening rental markets, with their vacancy rates reaching new lows of 1.11% and 1.07% respectively. Perth and Adelaide continued to be the most constrained markets in the country, with both cities having sustained rental vacancies below 1% since 2022. Perth now has a vacancy rate of 0.85%, with Adelaide slightly ahead at 0.83%. Brisbane follows closely with a vacancy rate of 0.95%.

Despite some early signs of improvement in 2023, regional markets have also been grappling with limited availability. The vacancy rates in these areas saw a decline over the latter half of the year, now standing 0.22 percentage points lower than the same period a year ago.

Paul Ryan, senior economist at PropTrack and author of the report, expressed concern over the deteriorating rental market conditions, especially in capital cities. “Most capital and regional areas were facing as limited or more limited availability than they were compared to a year ago,” he said. Ryan also pointed out that Sydney and Melbourne saw notably larger declines than other capitals, with vacancy rates in both cities falling 0.3 percentage points compared to February 2023. “Rental markets in Brisbane, Adelaide and Perth remain extremely challenging, with vacancy rates in all three cities below 1 per cent,” Ryan elaborated.

The tight conditions in the rental market are also affecting affordability for tenants across the nation. Ryan highlighted that competition for rentals is likely to remain intense, exacerbating challenges in rental affordability. “With rental market conditions extremely tight, competition for rentals is likely to remain tough. In the near term, that is likely to continue to put pressure on rents and further strain rental affordability, which is already at its worst level in at least 17 years,” he remarked.