The PropTrack Market Insight Report revealed a 1.12% month-on-month increase in new rental listings in the December quarter, offering some relief to renters competing for limited stock. 

However the slight easing in the previous quarter was not able to push the national vacancy rate up throughout 2023, which dropped a further 0.13 percentage points, according to the report. 

“Although vacancy rates eased in most markets in December, rental markets remain tight, and stock is extremely limited,” PropTrack senior economist Eleanor Creagh said. 

A vacancy rate of 2-3% is considered a healthy market where supply can match demand; anything under 2% is considered tight.

With the number of vacant properties remaining at low levels, Ms Creagh anticipates tenants will continue to face challenging conditions. 

While Australia’s rental market remains highly competitive, there appears to be a glimmer of hope that conditions are bound to improve. 

Some cities bounce back but other markets are still tight 

Good news for tenants looking for rentals in Sydney and Melbourne, as vacancy rates in both cities climbed to a 12-month high. 

A recent report by Domain showed new rental listings in Sydney rose 1.3%, while Melbourne posted a 1.2% increase over the December quarter. 

The seasonal lift in vacant rentals occurring at the end of the year as the market moves into the busy changeover period is said to have pushed up vacancy rates across capital cities.

But that doesn’t mean potential tenants won’t face any competition for vacancies, especially in Sydney and Melbourne.

“While a rise in the number of properties for rent is expected during the busy changeover period, it is set to be the cities’ most competitive as the vacancy rate is at its lowest for the month of December,” said Dr Nicola Powell, Domain’s chief research and economics.

Among the tight rental markets in 2023, Melbourne experienced the greatest tightening in conditions with a 0.33 percentage point drop. 

Despite a slight easing from February’s 0.6% record low, Brisbane’s rental market remains highly competitive for house-hunting tenants with a 0.9% vacancy rate. 

It’s even tougher to find rentals in Adelaide and Perth, with both cities’ vacancy rates remaining at a critical 0.4%. 

“While the vacancy rates have lifted marginally from record lows – Adelaide’s 0.2% in 2022 and Perth’s 0.3% in November – they are still on par with the same time last year, indicating that not much has changed,” Dr Powell said.

Hobart’s vacancy rate recovered from a record low of 0.2% in February to 0.8%, the highest vacancy rate for the month of December.

Vacancy rates also went up in Canberra and Darwin.

Based on the 2-3% rate requirement to reach market equilibrium, Canberra’s 2.0% vacancy rate suggests it now has a better balance between landlords and tenants and is likely to present a more favorable changeover period for renters. 

Meanwhile, Darwin’s vacancy rate jumped to 1.7%, the highest since mid-2020. 

Rent prices hold steady for the first time in almost three years

Overall, it has been a highly competitive rental market in 2023, placing pressure on Australians’ household budgets.  

Low rental vacancy rates indicate a supply and demand mismatch that results in high asking rents. 

“These conditions make it difficult for many to find an available rental property and drove strong price growth throughout 2023,” Ms Creagh said.

At the end of 2023, rents stood at record highs, with median asking rents at $600 weekly for both houses and units.

“However, conditions in the rental market are unlikely to deteriorate at the same pace as they did in 2022 and 2023, meaning rental prices could stabilise and increase at a slower rate than the past year,” Ms Creagh said.

Domain’s December report showed house weekly asking rents across capital cities held steady after a record-breaking 10 consecutive quarterly increases.

There was no movement in Sydney’s unit rents in the three months to December, the first time in two and a half years. 

Similarly, for the first time in two years, asking rents for Melbourne houses and units remained steady in the last quarter.  

Adelaide unit rents stayed put over the quarter for the first time in a year. 

However, there seems to be no reprieve yet for Brisbane tenants as house and unit rents continue to rise, posting another record high at $600 per week for houses and $560 for units.

Perth likewise continued its record-long stretch of rising rents, as house rents increased for the ninth consecutive quarter and unit rents for the sixth. 

Asking rents for Hobart units flatlined for the second quarter in a row, while house rents returned to record levels of $550 per week.

Canberra’s house and unit rents increased for the first time in 12 months. 

The last quarter saw Darwin’s unit rents at their highest since 2014.

According to Domain, stretched affordability, more renters opting for house shares, and slow return of investors caused the slowdown in rental growth in 2023, which is expected to continue in 2024. 

“We are also likely to see some renters transitioning to homeownership with the new first-home buyer incentives in place, such as Queensland doubling the first-home buyer grant and the anticipated federal government's ‘Help to Buy’ shared equity scheme,” Dr Powell said.

“We forecast a tipping point to be reached at some stage this year, making a return to a more balanced rental market.”

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