Key takeaways
Australia’s rental crisis is far from over. Vacancy rates remain exceptionally low across most capital cities, keeping upward pressure on rents despite slower migration.
The real issue is a lack of housing supply. Australia is not building enough homes, and policies that discourage investors risk making rental shortages even worse.
Inflation is easing, but underlying pressures remain. While headline inflation has fallen, underlying inflation is still above the RBA’s target range, reducing the likelihood of near-term rate cuts.
Buyer confidence is becoming more cautious. Auction clearance rates remain steady but are well below last year's levels, reflecting the impact of higher interest rates and affordability pressures.
Long-term property fundamentals remain strong. Chronic housing undersupply, population growth, household formation and the scarcity of quality homes in desirable suburbs continue to support long-term property values.
Australia’s rental crisis is getting worse, inflation is proving stubborn, and auction markets are starting to tell us buyers are becoming more cautious.
So what does that mean for property investors, homeowners and anyone trying to make sense of the market?
My Housing Market's latest rental report shows vacancy rates remain extremely tight across most capital cities, with rents still rising in many markets. And that’s despite slower migration growth and more first-home buyers entering the market.
The problem is still supply. We don’t have enough rental accommodation where people want to live, and policies that discourage property investors are only likely to make that shortage worse.
In this week’s Property Insider chat, Dr Andrew Wilson and I also look at inflation, because while headline inflation has eased, underlying inflation is still sitting above the Reserve Bank’s target range. That matters for interest rates, borrowing capacity and buyer confidence.
And then we’ll look at auction markets, where clearance rates were generally steady over the long weekend, but clearly softer than the stronger conditions we saw a year ago.
Rental markets remain under pressure
Watch this week’s Property Insider chat as Dr Andrew Wilson explains how rental markets continued to tighten over May.
Andrew’s latest rental report shows that already low vacancy rates generally tightened further over the month for both houses and units.
Just to be clear..rents are not rising because landlords are suddenly becoming more aggressive. They are rising because there simply are not enough rental properties available in the locations where tenants want to live.
For houses, Sydney and Darwin recorded the highest median weekly asking rents at $850 per week, while Melbourne remained the most affordable capital city at $600 per week.
But the broader point is that house vacancy rates remain extremely tight, generally at or below 1.0% in most capital cities.
This is not a normal rental market, it is a market still suffering from a chronic shortage of supply.
Unit rental markets told a similar story over May.
Capital city unit vacancy rates were mostly lower or steady over the month and generally remained well below 1.5%, with Canberra the notable exception at 2.4%.
That means tenants still have limited choice in most markets.
And when tenants have limited choice, rents remain under upward pressure.
Some commentators assumed that slower migration would quickly ease the rental crisis, but that was always too simplistic, as even though migration growth has continued to ease and first-home buyers have become more active, this has been offset by lower new supply.
Rental markets are affected by more than just migration.
They are affected by household formation, the number of people moving out of share houses, the number of young adults leaving home, the number of investors entering or leaving the market, and the amount of new housing supply being delivered.
And on the supply side, Australia is still falling well short.
So when governments make it harder, more expensive, or less attractive to provide rental accommodation, they should not be surprised when the supply of rental accommodation dries up.
That does not help tenants - it hurts them.
Inflation is lower, but not low enough
Watch this week's Property Insider channel as Dr. Andrew Wilson explains how the latest inflation numbers add another layer of complexity.
- Also read:Australia’s Rental Crisis Is Getting Worse – And the “Solutions” May Be Making It Worse | Property Insiders
- Also read:Latest Property Price Forecasts. Australian Property Market Outlook 2026: Where To Now After The Rate Rise & Budget Changes.
- Also read:National Weekly Auction Report – June 6th 2026 | Auction Markets Mainly Steady Over Holiday Week
- Also read:Supply Surges, Asking Prices Stall as Housing Market Reaches Turning Point | Latest SQM Listing Data
- Also read:Home Prices Now Falling Following Rate Rises | Latest stats from Dr. Andrew Wilson
Headline inflation fell from 4.6% to 4.2% over the month, which sounds like good news, but the number that really matters for the Reserve Bank is underlying inflation, and that moved the wrong way.
Electricity and fuel price growth eased over the month, helping bring down the headline number.
Annual electricity price growth fell from 25.4% to 22.5%, while annual fuel price growth fell from 24.2% to 18.6%.
Rental growth also eased slightly from 3.7% to 3.5%.
Underlying inflation rose from 3.3% to 3.4%, which is still above the RBA’s 2-3% target range, which means the Reserve Bank is unlikely to declare victory on inflation yet.
However, it's likely that the RBA will keep rates on hold at its June meeting, while it allows the market to absorb all its current challenges.
Auction markets are softer, but not collapsing
The latest auction results also tell an interesting story.
Capital city auction clearance rates were generally steady over the long weekend period, despite the distractions of a public holiday in most states.
The national weekend auction market reported an average clearance rate of 50.5% over the past week, which was slightly lower than the 51.0% reported over the previous week and again well below the 64.3% reported over the same week last year.
Auction market activity is clearly reflecting the negative impact of recent RBA rate rises with the typically quieter winter market also now looming.
What this means for property investors
When you put all this together, the message for property investors is reasonably clear.
The rental market remains fundamentally undersupplied. Inflation is easing, but not enough to give the RBA complete comfort. And auction markets are softer, reflecting more cautious buyers and the impact of higher interest rates.
In the meantime, government policy continues to create uncertainty for investors.
That may sound like a difficult environment, and in some ways it is, but experienced investors understand that markets rarely offer perfect conditions.
By the time everything feels safe, obvious and easy, the best opportunities have usually gone.
The key is to separate short-term noise from long-term fundamentals.
And the long-term fundamentals remain very clear.
Australia does not have enough housing. We are not building enough new dwellings. Rental vacancy rates remain extremely low.
Population growth, household formation and lifestyle changes continue to underpin demand for well-located housing.
And despite all the talk about affordability, desirable properties in established, amenity-rich suburbs remain scarce.
That scarcity is what underpins long-term capital growth.
So if you would like to understand what all this means for your own investment strategy, the team at Metropole would be happy to help.
Click here now and organise a Wealth Discovery Chat with one of our wealth strategists.
