Rents to keep climbing as vacancy rates fall to new low of 1.1pc in August: PropTrack

Intense competition for rental properties shows no sign of easing, with national vacancy rates falling to a new low in August.

National rental vacancy rates hit a record low in August as elevated levels of immigration inflate the tenant pool at a time when more landlords are selling up.

Data from PropTrack shows that the national rental vacancy rate recorded its largest drop in over a year in August, falling by 0.14 percentage points to 1.1 per cent.

The share of rental properties vacant and available is 54 per cent lower compared to the start of the pandemic, driven by the number of investors leaving the market and fewer homes being built at a time when the country’s population is growing at its fastest level in more than a decade.

Falling vacancy rates combined with intense demand is expected to put greater pressure on tenants already struggling to afford the cost of putting a roof over their heads, with PropTrack forecasting rents to further climb. This comes after the Australian Bureau of Statistics reported that rents grew 7.6 per cent in the 12 months to July, compared to CPI of 4.9 per cent.

PropTrack senior economist Anne Flaherty said there are no signs rental conditions are easing,

with the perfect cocktail of immigration, fewer investors, smaller households and more Australians trapped in the rental market fuelling the storm.

“We anticipate that rents will keep climbing in the months ahead and there is a real possibility that vacancy rates fall even further,” she said.

“The fact that interest rates haven rise by so much is trapping many would be first home buyers in the rental market as the amount of money they can borrow is 30 per cent less than in April 2022, but house prices have not fallen anywhere by that amount.”

Intense competition for rentals is expected to see rents keeping increasing. Picture: Angelo Velardo/AAP Image

Sydney saw rental conditions deteriorate further in August, with its vacancy rate falling by 0.19 per cent to 1.26 per cent, while Melbourne dropped 0.1 per cent to 1.19 per cent, according to PropTrack.

Levels were much lower across the rest of the country, with Brisbane’s vacancy rate edging slightly lower to 0.84 per cent, while Adelaide and Perth remain the tightest markets with vacancies below 0.7 per cent.

Canberra had the highest rental vacancy rate of any capital city, at 1.72 per cent, but recorded the sharpest monthly drop of 0.26 per cent. Darwin saw rental vacancies increase 0.17 per cent to 1.7 per cent in August.

Housing affordability is at its worst level in three decades with PropTrack reporting that the ‘typical’ or median-income household, earning just over $105,000 a year, can afford just 13 per cent of properties traded in the past year.

More than half of all property investors are aged over 50, with those aged over 60 accounting for the largest share of any age group, according to the Australian Taxation Office’s. This comes as a recent survey from realestate.com.au’s Property Seeker Survey found that 50 per cent of landlords believer investment properties are not as attractive as they used to be.

Ms Flaherty said the volume of older property investors was bad news for the market, with many likely to sell as they near retirement.

“Many property investors sold during the pandemic when rents declined while property prices surged so much that they were able to get a good return,” she said.

“Older Australians don’t really benefit from negative gearing.”

“Even though rents are increasing, rising costs of operating a rental have increased in most cases by more. For retirees looking for an income stream, they are finding that they are better off by selling and putting the cash in the bank.”

The challenges of finding a rental comes as the Australian population grew by nearly 500,000 in 2022 to 26.3 million, driven mostly by the arrival of 387,000 new migrants — the equivalent of the Australian Capital Territory’s population.

At the same time, the number of new dwelling approved for construction plunged 16.9 per cent in the 12 months to July.