Australia's rental crisis set to get worse, as first home buyers and renters battle it out
Low vacancy rates expected to persist for the next 12 months due to rapid population growth and housing supply issues. Image: Canva.
  • Record-low vacancy rates across Australia's capitals, with Sydney, Melbourne, and Hobart hit worst.
  • Population growth, reduced affordability, and lack of housing supply, exacerbating the rental crisis.
  • Increasing home construction and rent assistance, essential to alleviate the ongoing rental crisis.

Australia’s rental crisis worsened in October, with most capital cities seeing vacancies tighten over the month, according to PropTrack‘s latest report.

Accordingly, the national vacancy rate reached a new low of 1.02% after declining by 0.06 percentage points (ppt).

Residential vacancy rates – National

“Tenants faced even tougher conditions in October, with the proportion of rental properties sitting vacant falling to the lowest level on record,” said PropTrack economist and report author, Anne Flaherty.

“Just 1.02% of rentals were vacant in October, with vacancies down in both capital city and regional areas and record lows reached in New South Wales, Victoria, and Queensland.

“The national vacancy rate has been trending down for well over three years now – a trend that looks likely to continue off the back of strong population growth and a slowdown in the supply of new housing.”

Sydney, Melbourne and Brisbane suffered the steepest falls in October

PropTrack rental vacancy rates – October 2023

All dwellings Vacancy rate Monthly change (ppt) Quarterly change (ppt) Annual change (ppt) Change since March 2020
Sydney 1.11% -0.08 -0.37 -0.35 -64%
Melbourne 1.09% -0.06 -0.22 -0.55 -52%
Brisbane 0.87% -0.04 -0.06 0.05 -56%
Adelaide 0.67% 0.01 -0.14 -0.03 -50%
Perth 0.70% -0.02 -0.12 0.01 -70%
Hobart 1.21% -0.18 -0.42 0.58 -14%
Darwin 2.47% 0.68 0.94 0.54 -46%
ACT 1.61% -0.01 -0.39 0.29 81%
Capital Cities 1.02% -0.05 -0.23 -0.25 -58%
Rest of NSW 1.22% -0.02 -0.30 0.15 -39%
Rest of Vic. 0.97% -0.15 -0.30 0.04 -35%
Rest of Qld 0.87% -0.08 -0.30 -0.17 -61%
Rest of SA 0.72% 0.06 -0.15 0.06 -71%
Rest of WA 1.05% -0.08 -0.20 -0.04 -68%
Rest of Tas. 1.03% -0.12 -0.52 0.22 -31%
Rest of NT 1.63% 0.16 -0.58 0.04 -54%
Regional Areas 1.02% -0.07 -0.31 0.01 -51%
National 1.02% -0.06 -0.25 -0.18 -56%

Source: PropTrack.

The rental market worsened in Sydney for October, with vacancies slipping 0.08 ppt to a record low of 1.11%. Similarly, Melbourne’s vacancies dropped by 0.06 ppt, hitting a record low of 1.09%.

“Melbourne and Sydney have seen the sharpest falls in available rentals over the past 12 months, with vacancy down 0.55 ppt and 0.35 ppt respectively,” Flaherty said.

“Conditions have also deteriorated in regional areas, with vacancy down 0.31 ppt over the quarter.”

Perth’s vacancy rate, which has stayed under 1% for 15 months now, fell by 0.02 ppt, reaching 0.7%. Brisbane fared no better, with its vacancy rate below 1%, dropping by 0.04 ppt to 0.87%.

Adelaide, which holds the crown for having the lowest vacancies nationally, remained fairly stable at 0.67%.

Hobart experienced the most significant slump in vacancies of any capital city, dipping by 0.18 ppt to 1.21%.

Meanwhile, Darwin was the only capital that saw a substantial rise in vacancies, spiking by 0.68 ppt to a healthy 2.47%.

The long road ahead

“Vacancy rates are expected to remain at incredibly low levels over at least the next 12 months, with several factors at play,” Flaherty told The Property Tribune.

“Currently, Australia’s population is expanding more rapidly than the supply of housing, meaning more people are competing to both rent and buy homes.”

“At the same time, it has never been more difficult to transition from being a renter to a first home buyer, with affordability sitting at the lowest levels on record.”

Anne Flaherty, PropTrack Economist

“Since interest rates first started rising last year, borrowing capacities have been reduced by around 30%. Property prices, however, have been resilient and reached new peaks in October.

“The only solution to the rental crisis is to increase the speed at which new homes are being developed. Achieving this encompasses everything from reforming the planning process, increasing land release and density limits, and rezoning where appropriate.

“One encouraging step that the government has taken has been to reduce some of the tax barriers to encourage more build-to-rent developments in Australia.

“However, while increasing supply is vital, it will not help to alleviate the current chronic shortage of rental homes. Governments can provide immediate relief by expanding rent assistance programs to help those who are most vulnerable.

“In addition to higher rents, the shortage of properties for rent means it is more likely tenants will have to make compromises on the type and location of the home they rent. We are also likely to see more people turn to share accommodation and an increased prevalence of multi-generational living.”

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