Australia's rental vacancy rate climbed to 1.5% in July, its highest level since February 2022, according to realestate.com.au's latest Market Insight report. The national rate rose 0.2 percentage points over the month, with capital cities and regional areas each recording an identical increase to reach 1.5% apiece.
Senior economist Anne Flaherty (pictured) said the extra supply has given tenants more options, even if the market remains far from balanced.
"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 said. "While vacancy rates have increased, they remain well below the 2.5-3.5% level considered to be a balanced market."
The squeeze is far from even across the country. Hobart and Darwin recorded the tightest vacancy rates among the capitals at 0.9% each, followed by Brisbane at 1% and Perth at 1.1%. At the other end of the scale, Canberra posted the highest vacancy rate at 1.9%, followed by Melbourne at 1.8% and Sydney at 1.7%.
Flaherty noted that "vacancy rates remain particularly tight in many of Australia's smaller capitals," while Canberra, Melbourne, and Sydney recorded the highest vacancy levels among the capitals in July.
Compared with five years ago, the market looks very different depending on location. Capital city vacancy rates are sitting 1.1 percentage points lower than in July 2021, while regional vacancy rates are up 0.4 percentage points over the same period, a legacy of the pandemic-era shift toward regional living that has since partly unwound.
Affordability hasn't followed suit: Cotality, using a different methodology, put July's vacancy rate at 1.7% and annual rent growth at 5.9% — adding roughly $40 a week to the median rent.
Flaherty pointed to a jump in investor activity as the main driver behind the recent easing in rental pressure. "In the 12 months to June 2026 the number of new loans to investors was tracking at the highest level seen since the Australian Bureau of Statistic began reporting this data in 2019," she said. "That surge in investors is likely behind the recovery in vacancy rates this year."
However, Flaherty cautioned that this tailwind is unlikely to continue, given recent policy changes affecting property investment. She said the trend was "now likely to reverse following the reduction in tax concessions for investors as part of the May budget," which is expected to slow the pace at which new rental supply is added in the months ahead.
That shift is already hitting investor borrowing capacity: CBA and ANZ are among several major lenders that now limit negative gearing benefits in serviceability to newly-built properties or established properties contracted before 12-13 May 2026.
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