'Hunger Games situation’: Rental vacancies at record lows as tenants do it tough

Tenants are facing tough competition for a rental across the country, with Australia’s vacancy rate remaining at an all-time low in April, new data shows, as rents rise at the same time.

The national vacancy rate remained at 1 per cent after reaching the record low in March, Domain’s latest Rental Vacancy Report revealed.

It is down by almost a percentage point since April last year, when tenants were kept out of the Australian rental market due to COVID-19 border closures.

But property managers, including those in Sydney and Melbourne, say the market has changed from “night to day” this year, as demand is added from international students returning to school and local workers returning to the office.

Sydney recorded its lowest ever vacancy rate of 1.4 per cent, down by almost half since April last year, while Melbourne’s beleaguered rental market also showed further signs of improvement with the rate falling to 1.7 per cent, down from a massive 4 per over the same time period.

Other capitals saw vacancy rates rise marginally or remain steady in April, still proving incredibly difficult for prospective tenants.

Adelaide’s 0.3 per cent was the tightest vacancy rate in the country, while Hobart’s 0.4 per cent and Darwin’s 0.5 per cent were also tight. Perth sat at 0.6 per cent and Brisbane and Canberra recorded a 0.7 per cent vacancy rate over the month.

Domain’s chief of research and economics, Dr Nicola Powell, said the capital cities were operating in a landlord’s market, with tenants needing to compete for properties and future rent rises on the horizon.

“Many cities are sitting at record high asking rents, with all capital cities seeing an increase in median rents for the first quarter of 2022, except Sydney houses, which remain steady at a record high,” Powell said. “The current conditions bolster the likelihood of future rent increases.”

Sydney Cove Property director Grant Ashby said the inner city rental market had “accelerated” after rents dropped by up to 30 per cent during 2020 and 2021.

Sydney’s house rents jumped by $50 per week over the year to March, to a median weekly rent of $600, Domain data showed, while units jumped by $30 per week to $500.

“Most of the growth has come back this year,” Ashby said. “The driver has definitely been people returning to the city for work.”

Expats were returning from overseas to rent in the harbour city and international students were also becoming tenants in areas like Randwick, close to schools and universities.

“The CBD market really is like night and day this year compared to last year,” Ashby said. “We would have open for inspections [of rentals] and only one person would turn up. It was very, very quiet. Now the whole game has shifted.”

It was a similar story in Melbourne, where far more tenants are competing for rentals. Melbourne’s house and unit rents both jumped by $15 per week over the year to March, with median rents for houses now $450 per week and units $390.

McGrath South Yarra senior portfolio manager Shaun Broadbent said a rental he had advertised on Tuesday in the ritzy suburb had received eight inquiries after just 10 minutes of being online.

“We’ve got eight people ready to inspect it,” Broadbent said. “It has been more difficult for prospective tenants because more demand is there.”

Broadbent said rentals were often being tenanted within a week of being advertised, with many moving into a two-bedroom home so they had more space for a home office.

Economic program policy director at the Grattan Institute Brendan Coates said fewer available rentals and growing demand from tenants, including those moving from overseas, was the perfect recipe for continuing rent rises.

“Rents are rising pretty sharply and it [affordability] is absolutely a problem,” Coates said. “We saw some respite in rents in Melbourne and Sydney during COVID but now migrants are starting to return and the population growth is starting to turn around.”

Coates said the only solution to the problem of the extremely tight rental market was to build more homes to give tenants more choice and chance of finding somewhere to live.

“In the long term it’s the only solution,” Coates said. “We can’t continue this Hunger Games style situation, so the only way to solve that is by building more homes.”