Australia's rental crisis 'is about to get worse'

If you are a tenant Australia’s rental market is tough and it’s not about to get any easier.

If you are an investor then Australia’s extremely low vacancy rates are glimmer of good news at a time when property investment is being discouraged through ongoing tax changes.

The real estate industry benchmark for a balanced rental market is 3 per cent. If vacancies are around that level, it means there is a good supply of rental homes for tenants to consider and rents are likely to be stable.

Nationally vacancy rates have not been as high as 3 per cent at any time in the past 20 years – all capital city markets are well below that.

If vacancies are 4 per cent or 5 per cent, rents are likely to fall. If they’re consistently below 3 per cent, rents will almost certainly rise.

While there were moments, most recently during Covid restriction periods, when Australia had more than 80,000 rental homes available, that is no longer the case.

The supply of available rental properties has halved at a time when Australia’s population continues to surge by an additional 4 million residents in the past ten years.

In the past four years, according to SQM Research data, there has been fewer than 40,000 rental dwellings available – half the highest levels of the past 20 years.

No matter how you look at it, 40,000 properties across the whole of Australia means it is an extremely tight market.

Currently the national vacancy rate is 1.3 per cent.

In May 2026 the Federal Government delivered a Budget that made the rental situation considerably worse for tenants. In the three months since then, there has been significant evidence of tenants’ costs going through the rental roof.

Conditions remain tight across all the eight capital cities, with Brisbane, Perth, Adelaide, Darwin and Hobart all recording vacancy rates well below 1 per cent.

Sydney is the only major city where there has been any easing of vacancy rates compared to a year ago, although the improvement has been marginal and the vacancy rate remains low at 1.7 per cent.

So, against that backdrop of ongoing tight conditions in rental markets, is there any prospect of improvement for tenants?

The answer, categorically, is no. With the recent Federal Budget discouraging investors, vacancies are likely to tighten further and rents will keep rising.

One major real estate chain that manages 250,000 rental properties has forecast that rents are likely to increase 30 per cent.

The solution is not easy. Australia’s supply of new housing is woefully below where it needs to be.