Australia’s rental market has experienced modest improvement over the past year, offering some relief to tenants after years of intense competition and rising rents. While vacancy rates have edged higher nationally, housing availability remains well below pre-pandemic levels, leaving many renters facing ongoing affordability challenges. Industry experts caution that without a substantial increase in housing supply, rental pressures are likely to remain a long-term concern. 

Vacancy Rates Begin to Improve

National rental vacancy rates increased to 1.37% in the year to May, marking a slight improvement from the previous year. Although this indicates more rental properties are becoming available, vacancy levels remain significantly lower than the rates commonly seen before COVID-19, when vacancies generally exceeded 2%. The increase has provided some breathing room for renters, but market conditions remain tight overall.

How the Pandemic Reshaped Rental Demand

Before the pandemic, Australians largely migrated towards major cities in search of employment opportunities, lifestyle benefits, and access to services. However, the shift to remote work during COVID-19 encouraged many people to relocate to regional areas. This surge in demand drove regional vacancy rates to record lows and pushed rental prices higher across many regional communities. At one point, median rents in regional Australia matched those of capital cities at $450 per week, highlighting the extraordinary market shift.

Regional Areas Lead the Recovery

Recent data suggests regional rental markets are experiencing the most noticeable improvement. Since October 2025, vacancy rates in regional Australia have risen from 1.04% to 1.45%, surpassing capital city vacancy rates for the first time since mid-2024. This increase is expected to moderate rental price growth in regional locations, providing renters with greater choice and slightly reducing competition for available homes.

Renters Still Facing Affordability Pressures

Despite easing conditions, many households continue to feel the impact of elevated rental costs. Rental prices have risen from a much higher base over recent years, meaning even slower growth can still place financial strain on tenants. This challenge is particularly evident in areas where wage growth has not kept pace with rising housing costs, increasing financial pressure on many families and individuals.

Housing Supply Remains the Key Issue

Experts continue to point to a shortage of housing supply as the primary factor driving rental stress across Australia. While vacancy rates have improved slightly, demand for housing continues to exceed available stock in many locations. Unless significant progress is made in increasing housing construction and delivery, low vacancy rates and rental affordability concerns are expected to persist.