Australia is in the midst of a rental crisis that could very well worsen over the course of this year.
Across the country, the share of all rental properties sitting vacant has more than halved over the past three years, plummeting from 2.42% to just 1.09% between January 2021 and January 2024.
Compared to March 2020 when the pandemic was first kicking off, 98% of Australia’s statistical area 4 (SA4) regions have seen vacancy rates drop. In fact, there were just two regions that saw vacancy rise over this time – the Australian Capital Territory and Outback Queensland.
SA4s are geographical areas defined by the Australian Bureau of Statistics, with a minimum population of 100,000 persons.
Typically, a healthy vacancy rate is defined as being around 3%. This is one where there is an appropriate balance between the availability of vacant rentals and tenant demand.
Just 2% of Australia’s SA4 regions had a vacancy rate sitting above 3% in January. In other words, tenant demand is almost universally outweighing supply across most of the country.
So, in which regions are tenants doing it toughest?
Western Australia’s wider Bunbury region recorded the lowest vacancy rate in the country in January, with just 0.45% of rental properties sitting vacant. This was the seventh consecutive month Bunbury has recorded Australia’s lowest vacancy rate.
Following Bunbury were Queensland’s Sunshine Coast and Melbourne Outer East, with vacancy rates of just 0.58% and 0.6% respectively.
While similarly low vacancy rates are persisting across both capital city and regional areas, it’s the cities that have seen the largest drop in availability over the past year.
Tenants looking for a home in Greater Perth are doing it tougher than in any other capital city with just 0.76% of all rental properties vacant and available in January. Vacancy in Greater Adelaide and Greater Brisbane was also sitting at sub-1% levels in January, at 0.78% and 0.86% respectively.
Across Australia’s rest of state areas, regional Queensland recorded the lowest vacancy rate in January, at just 0.95%, followed closely by regional Tasmania at 0.97%.
The growing prevalence of sub-1% vacancy rates across Australia’s capital city and regional areas is extremely concerning and points to a severe undersupply of homes relative to tenant demand.
Unfortunately, there looks to be little relief in sight. The speed at which new housing is being developed in Australia is slowing, with the number of homes approved for development in 2023 at the lowest level seen in a decade, and population growth remains strong. This will maintain competitive conditions in both the markets to rent and also to buy.
Consequently, rental availability is likely to deteriorate further over the year which will erode affordability. We are also likely to see the average household size increase as more look to move into share houses or stay longer in the family home.
