Capital cities see modest improvement

realestate.com.au’s Market Insight report, authored by Senior Economist Anne Flaherty, shows the vacancy rate rose by 0.2 percentage points across the board. Both capital cities and regional areas recorded the same increase. Canberra sits at the highest end of the spectrum at 1.9%, followed by Melbourne at 1.8% and Sydney at 1.7%. In contrast, the tightest markets remain Hobart and Darwin at 0.9%, with Brisbane at 1.0% and Perth at 1.1%, according to the report.

Despite the monthly rise, the vacancy rates are still 1.1 percentage points lower than they were five years ago. A balanced market is generally defined as having a vacancy rate between 2.5% and 3.5%. The current supply levels remain well below what is considered healthy, meaning landlords still hold significant leverage over potential tenants even as options slowly appear.

Tax cuts expected to slow new supply

The uptick is largely attributed to a surge in investor lending activity. New loans to investors have reached their highest level since the Australian Bureau of Statistics began tracking the metric in 2019. However, Anne Flaherty suggests this trend is unlikely to last. She notes that the May Budget’s reduction in tax concessions for investors will likely reverse the wave of new lending.

“Choice for renters improved in July, with the volume of available rentals up in every capital city and regional area compared to three months ago,” Flaherty noted. She expects that as the tax incentives shrink, the rate at which new rental supply is added will slow down significantly. The modest easing in supply comes with a caveat: agents managing rent rolls are already anticipating that this improvement in tenant choice will be temporary as investor activity drops off.

While the vacancy rate offers a statistical pause, the human impact of the rental market tells a different story. Separate research from the Australian Housing and Urban Research Institute highlights the instability faced by families renting privately, particularly those with children. The study, led by Associate Professor Amy Clair, found children growing up in private rentals move an average of six times by age 14.

This high frequency of moves contrasts sharply with children in owner-occupied homes, who move just over twice, and those in social housing, who move just over four times. The research points out that housing is a critical determinant of physical and mental health and educational outcomes. Overcrowding is also a significant issue; roughly 10% of children in private rentals experience it, compared to 3% to 4% of children in homes they own.

Households with children in private rentals are also struggling financially. The data shows around 18% of these households are behind on their housing payments, compared to only about 7% of households with a mortgage. This financial strain creates a precarious environment for families trying to maintain stable housing.

Homeownership continues to decline

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