Australia’s rental market is showing signs of improvement, but capital-city tenants are still facing a far tighter market than five years ago.
Australian renters are being told the market is finally easing, but new figures reveal millions of capital-city tenants are still trapped in a brutal housing squeeze.
PropTrack data shows the national rental vacancy rate rose to 1.37 per cent in May, its highest level since January 2025.
But the apparent relief masks a tougher reality for city renters, with capital-city rental availability still 42 per cent lower than it was five years ago.
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Darwin remained the nation’s tightest capital rental market, with just 0.77 per cent of rentals vacant, followed by Hobart at 0.85 per cent.
Brisbane was next at 1.01 per cent, ahead of Perth at 1.04 per cent and Adelaide at 1.16 per cent.
Sydney’s vacancy rate rose to 1.37 per cent, while Melbourne had the second-highest vacancy rate of the capitals at 1.63 per cent, behind Canberra at 1.67 per cent.
PropTrack senior economist Luc Redman says renters in some cities may see pressure ease, but the market remains tight overall.
PropTrack senior economist Luc Redman said renters in some cities would feel a slight easing in pressure, but the market remained deeply strained.
“It’s fair to say that the rental conditions are still tough,” Mr Redman said.
“Being 40 per cent down in the capital cities from five years ago is certainly a problem and rental stress is still very high.
“In certain cities such as Melbourne and Canberra, they will certainly see a slight easing of rental pressures and rental hikes over time because of this higher vacancy rate.
“But when you consider other cities where it’s a bit tighter, like Darwin and Hobart, those rental increases are probably going to be more likely.”
Darwin and Hobart remain Australia’s toughest capital-city rental markets, with vacancy rates still below 1 per cent. Picture: NCA NewsWire / Max Mason-Hubers
Mr Redman said regional Australia had recorded the more meaningful improvement, with rental price growth likely to slow outside the capitals.
But he warned Darwin and Hobart’s ultra-tight markets were being driven by a shortage of homes.
“A key reason is basically the stock side of the equation,” he said.
“There was already quite a big undersupply of dwellings, particularly within Hobart.
“But obviously, as the story is nationally, there’s just not enough housing.”
National Shelter chief executive Jackson Hills says the vacancy lift is a tentative improvement, not a turning point for renters.
National Shelter chief executive Jackson Hills said renters should not mistake the latest vacancy lift for a turning point.
“I would describe this as a tentative improvement, not a turning point,” Mr Hills said.
“Vacancy has lifted, but only slightly, and from very low levels. With supply still tight and uneven, many renters won’t feel a real change.
“It also shows how deep the crisis is. A 1.37 per cent vacancy rate would normally signal a severely undersupplied market, yet it’s now seen as good news.
“More balanced markets tend to sit closer to 2-3 per cent.”
Mr Hills said regional markets were loosening faster, but capital cities remained under intense pressure.
“In places like Darwin and Hobart, sub-1 per cent vacancy means extreme scarcity, very few options, intense competition, and rising rents, with less security for renters,” he said.
He said governments needed to accelerate social and affordable housing, incentivise long-term rental supply and longer tenancies, reform Commonwealth Rent Assistance and strengthen renter protections.
Baseline Financial director Ari Levinson says higher investor costs are still flowing through to tenants.
Baseline Financial director Ari Levinson said the vacancy lift was not enough to shift the rental market back in tenants’ favour.
“That’s still a very tight rental market and generally means that rents are going to increase,” Mr Levinson said.
“Off the back of all the changes in terms of rental compliance and then now negative gearing, together with interest rates, insurance and everything, I can’t see rents getting any cheaper anytime soon.
“If anything, they’re only going to increase more.”
Mr Levinson said he had increased rents on his own investment properties more than usual to help cover rising costs.
“I have two properties at the moment, and both of those I’ve pushed the rent up more than I normally would to help cater for some of these costs,” he said.
“As investors slowly divest their properties and there becomes less supply of rentals, particularly in those markets where there’s not much supply coming on, rents are going to significantly increase in the short to medium term.”
Melbourne and Canberra have the most rental breathing room among the capitals, but both remain tight by historical standards. Picture: NCA NewsWire / Andrew Henshaw
Mr Levinson said some middle-ring suburbs could lose rental stock to owner-occupiers if investors sold established properties.
“Some investors, especially in those middle-ring markets, if they do decide to sell, they’ll probably be replaced by owner-occupier purchasers,” he said.
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