Australia’s rental market plunges further into crisis, with national vacancy rates falling to a new record low of just 1.1% for August.
PropTrack’s latest Market Insight report shows that the national vacancy rate recorded its largest drop in over a year (0.14%) over the month, which means that there are now 54% fewer rental properties available than 3.5 years ago in March 2020.
Worryingly, vacancy rates have dropped in 7 of Australia’s 8 capital cities, with Canberra and Sydney leading with the sharpest declines.
Even regional areas aren’t immune, with regional markets across the country recording declines with the exception of regional Western Australia where vacancy rates were flat month on month.
Canberra saw the sharpest drop of 26% to just 1.72% for August, while Sydney’s vacancy rate dropped 0.19% to 1.26%.
The lowest rates, however, have been recorded in Adelaide, Brisbane, and Perth where the tight rental markets translate to vacancy rates of just 0.68%, 0.69%, and 0.84% respectively.
Rental Vacancy Rates August 2023
|All dwellings||Percentage points|
|Vacancy rate||Monthly change||Quarterly change||Annual change||
Change since March 2020
|Rest of NSW||1.29%||-0.22||-0.25||0.23||-36%|
|Rest of Vic.||1.07%||-0.18||-0.18||0.09||-31%|
|Rest of Qld||0.94%||-0.16||-0.2||-0.02||-57%|
|Rest of SA||0.69%||-0.17||-0.12||0.01||-72%|
|Rest of WA||1.24%||0||-0.01||0.2||-62%|
|Rest of Tas.||1.24%||-0.31||-0.2||0.37||-18%|
|Rest of NT||1.96%||-0.22||-0.59||0.79||-44%|
Why is Australia’s vacancy rate so low?
In short, it’s because demand is at an all-time high and any available properties are being snapped up immediately by renters.
This is also exacerbated by an undersupply of rental properties which is causing increased competition.
During the latest market boom, many investors took the opportunity to sell off properties, in part due to uncertainty about rental demand but also because, in many cases, rising home prices provided the opportunity to sell out with solid capital gains.
In short, property prices skyrocketed so investors cashed in.
But as a flurry of investors sold up, the supply of investor-owned properties (i.e, rental properties) dropped.
By the end of 2021, 25% of properties sold across the nation were previously-rented properties and that figure has only climbed higher through 2022 and into 2023.
It may be understandable that investors wanted to get in on the price boom action, but I consider it a short-sighted move, and one which has exacerbated today’s rental crisis.
Of course, the undersupply of rental properties is two-fold - on one hand, many rental properties have been sold to owner-occupiers, then on the other hand there is a narrow pipeline of new projects nearing completion.
An apartment oversupply and other regulatory and non-regulatory factors have resulted in the collapse of investor demand for “off-the-plan” apartments.
Booming construction costs and a low supply of materials over the pandemic have caused many projects to stall, and fail to get off the ground, and there has been an uptick in the number of building companies going into insolvency.
At the same time that costs of new builds have surged, increased government intervention and tighter rental laws have dissuaded investors.
Australia’s growing population is also a contributing factor, with an influx of skilled immigrants and overseas students expected to put even more pressure on Australia’s rental markets.
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The recently released National Accounts showed that Australia’s population has grown by around 620,000 people in the past financial year.
That’s the highest number in history and a hundred thousand more than what the May federal budget projected.
This record 2.8% expansion in the 15-plus age group of our population is placing a great strain on our rental markets.
The number of overseas students and people on graduate visas in Australia has increased by just over three hundred thousand in the last financial year.
In fact, Australian Bureau of Statistics data shows a record net of 502,000 visa holders (excluding tourists) arrived in Australia in the year to July, with student visas accounting for 297,000 of these arrivals.
This means that around one in 10 people in Australia currently is a temporary migrant.
Of course, this explosion in temporary visa holders has been led by international student numbers.
But this has placed a huge strain on our rental markets.
In other words, the rental crisis will only be worsening further, with no end in sight.