Property vacancies are falling across Australia's capital cities – but rents in Sydney and Melbourne could be set to sink further

The rental market has bounced back and rents could follow. (Mark Syke, View Pictures, Universal Images Group via Getty Images)
  • Australia’s rental vacancy rate has returned to pre-pandemic lows, according to the latest Domain figures.
  • Just 1.9% of rental properties are now vacant, on par with levels seen 12 months ago.
  • With Sydney and Melbourne’s markets still soft and exposed to overseas migration, rents could fall further – especially for apartments.
  • Visit Business Insider Australia’s homepage for more stories.

The rental market looks to once again be turning against tenants as capital city markets tighten up beyond pre-pandemic standards.

The latest Domain figures show plenty of tenants have capitalised on the new year to find new living arrangements, occupying what has become a dwindling stock of rentals.

Australia-wide just 1.9% of capital city properties are vacant, lower than they were even 12 months ago, after months of falling rents.

“From a national perspective we’ve now seen vacancies hit their lowest point since before the pandemic which is quite a milestone,” Domain senior analyst Nicole Powell told Business Insider Australia.

The most recent reduction has been led by Sydney, where vacancies dropped a full 1% in the month of January to hit 2.9% across the city, on par with where they were in January 2020.

In Brisbane it is a similar story, with just 1.6% of Brisbane rentals now laying vacant. Meanwhile Perth, Adelaide, Canberra, Darwin and Hobart have now all ticked below 1% vacancy rates as the pool of available properties to lease becomes increasingly small.

“While places like Canberra have been tight for a while, there’s been an extraordinary change in Perth and Darwin which have in recent years been quite weak,” Powell said.

“Typically one of the biggest drags on those markets is an exodus of people to other states but border restrictions have really altered people’s decisions around where they want to live.”

Similar factors have pushed more people into areas on the outskirts or outside of major cities entirely.

An hour north of the CBD, the Central Coast suburb of Wyong has the tightest rental market near Sydney. It’s on similar footing with Victoria’s Mornington Peninsula, Nerang on the Gold Coast, Wanneroo in Perth’s north, and Marion in south-west Adelaide.

In fact, of all capitals Melbourne remains the only exception. Despite tenants filing in over the new year period, it’s still firmly a renters market, with a vacancy rate of 4.6%.

Inner city areas still empty

For some, it marks an enormous turnaround. Consider that the Harbour City recorded a ‘mass exodus’ in April, as the inner city emptied out and the vacancy rates in the CBD more than doubled to 13.8% in the space of four weeks.

A similar inner city trend was witnessed in Brisbane, as well as Adelaide, Canberra, and Hobart albeit from tighter market conditions.

The factors behind the inner city flight were clear. As the hospitality and tourism industries were hit particularly hard, borders were restricted, and unemployment rose, migrants and younger Australians alike were sent packing.

Sky high rent in places like Sydney no longer made sense for many residents, particularly as work from home (WFH) arrangements became mainstream and densely-populated suburbs sparked virus fears.

However, while the broader city markets have tightened, the reluctance to live in these inner city apartments has been slow to dissipate.

The suburbs with the highest vacancy rates in the country continue to be part of the inner city set. Melbourne City unsurprisingly remains the most empty area in the land, with one in nine properties remaining unoccupied. It’s followed closely behind by nearby Stonnington West and Stonnington East, as well as Whitehorse West and Boorandara.

Further afield, the trend plays out similarly. One in twenty Adelaide City homes are empty, an astounding 10 times the city average, amid an otherwise tight market. Inner Brisbane’s ratio of empty apartments ranks about the same while Perth city is twice the city rate.

Meanwhile Sydney’s share of empty suburbs meanwhile spreads from Auburn, Strathfield and Parramatta to north-west suburbs like Hornsby and Epping.

Rents stabilising

It means that depending where you live, you could soon be paying more or less in rent.

With even with vacancies returning to soft pre-pandemic levels in Sydney for example, Powell believes rents still have some way to fall.

“I think we have a two-speed market in Sydney where further price falls will be concentrated in areas tied to university populations and overseas migration,” she said.

Powell says the apartment market could be up for a rental price correction.

“The unit market is still likely to be soft, while houses could record some rental price growth.”

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