Rental vacancy rates have been declining since June, tightening competition in the market and making it increasingly difficult for prospective tenants to secure a home.
However, new data shows that trends may be shifting, with early signs of improving availability.
According to new data from PropTrack, national vacancy rates were 1.4% in October after a 0.25 percentage point (ppt) increase from September. They are currently the highest they have been since December 2024 and are now above the 3-year average.
The largest increases were seen in Darwin, Brisbane, regional Queensland and regional South Australia where vacancies rose by 0.40ppt, 0.35ppt, 0.36ppt and 0.32ppt, respectively.
This reflects a modest uptick in the number of properties available for rent which will be welcome relief for renters, especially those in Brisbane and regional Queensland, where vacancies remain among the lowest in the country at under 1%.
Vacancy rates have been at historical lows for several years as a result of strong migration, as well as shortages and delays in new housing construction. Interest rate rises from mid-2022 to late 2023 made property purchases less attractive for investors during that period which also affected the supply of rentals in the market in recent years.
However, data on the lending market suggests that the trends are changing which is likely to improve rental availability.
While vacancies may vary from month-to-month, investor activity has been trending upward and has seen a strong uptick, particularly this year. In the past 12 months, loans to investors have increased by 13% and they now make up 41% of all new home loans. This is the highest share since mid-2015, before APRA's tighter lending standards were implemented.
South Australia and the Northern Territory have hit an all-time high for the share of investor loans, with Queensland and Western Australia nearing peaks, and New South Wales at its strongest level since 2017.
This year's interest rate cuts, as well as high rent prices and limited rental availability, are considered key drivers of the surge in investor property purchases. Increased borrowing capacity and high rental yields have made property investing more appealing.
The surge in investors is positive news for renters as it reflects growth in the supply of rental listings and potentially less competition in the market.
Early signs of this are already emerging in the market, with new rental listings up 2.6% in Queensland and 13.5% in South Australia over the past year.
While these trends hint at a potential improvement in the rental market, they will need to persist for some time before having a significant impact.
Generally, a balanced and healthy rental market is characterised by a vacancy rate of around 3%.
Though vacancies were around 2.4% in 2019, availability was more than double of what it is today.
With rental turnover remaining relatively stable, according to the ABS, the persistent shortage in new home construction is likely to keep pressure on supply, while strong population growth continues to drive demand.
As a result, any meaningful easing of rental market pressures is expected to take time, dependent on sustained improvements in supply and a moderation of demand growth.
