(March 2025 Blog) Rental crisis deepens, but opportunities for buyers and investors remain
Australia's rental market is very tight. Vacancy rates are plunging, rents are climbing and tenants are facing unprecedented competition. But amid the squeeze, new opportunities are emerging for aspiring homeowners, and investors are stepping in to fill the supply gap.
National rental vacancy rates near record lows
The country’s rental market remains very tight with SQM Research reporting that rental vacancy rates declined across most capitals in January.
After some signs of easing in late 2024, Sydney’s vacancy rate has now dropped back to 1.4%. Other cities are facing even tighter conditions. Brisbane’s vacancy rate hit just 0.8%, the second-lowest level ever recorded, while Perth and Adelaide remained critically low at 0.4% and 0.5%, respectively. Hobart recorded its equal-lowest vacancy rate on record at just 0.3%.
This tight rental market has increased competition among tenants, putting upward pressure on asking rents. As a result, rents are surging nationwide. In the month leading up to February 12, 2025, Sydney’s asking rents rose by 1.4%, reaching a combined total of $841 per week. This increase was largely driven by a 1.9% rise in unit rents.
Brisbane saw a 0.6% rise, bringing combined rents to $671, reflecting ongoing demand.
Perth stood out with a strong 2.3% surge, pushing combined rents to $752 per week. Adelaide’s rental market was more subdued, with combined rents rising slightly by 0.3%, reaching $614 per week.
Meanwhile, Canberra saw a 1.1% increase, with combined rents rising to $682, as demand for both houses and units continued to grow.
On the other hand, Darwin and Hobart experienced rental declines. Darwin's combined rents fell by 1.7%, dropping to $605 per week, while Hobart saw the largest drop among the capitals, with combined rents decreasing by 2.1%, to $515 per week.
Melbourne rental market reflects national trend
Melbourne’s rental market mirrored the national shift, with vacancy rates tightening and rents continuing to rise. After showing signs of easing in late 2024, the city’s rental vacancy ratehas now dropped sharply to 1.5%, with just over 8,000 properties available, according to SQM Research.
At the same time, rental rates in Melbourne have climbed by 1.7% over the past month, reaching a median of $640 per week. This increase has been driven largely by the apartment market, with unit rents jumping 2.3% as demand continues to outstrip supply.
As affordability constraints push more tenants toward smaller dwellings, rental competition is intensifying, making it even harder for renters to secure a property.
HELP debt no longer a barrier to homeownership
With rental vacancies tightening again, many tenants are facing renewed challenges in securing affordable housing. “From a tenant’s perspective, the sharp drop in rental vacancies at the start of 2025 is highly disappointing, especially since there were some glimpses of a moderating rental market in the latter half of 2024,” said SQM Research managing director Louis Christopher.
As competition intensifies and rents continue to rise, more renters are weighing their options, including the possibility of buying instead of renting
One factor that could make homeownership more achievable is recent changes to the way lenders view Higher Education Loan Program (HELP) debt. After a request from Treasurer Jim Chalmers, the country’s two financial services regulators, APRA and ASIC, have agreed to revise their views on HELP debt.
Historically, HELP repayments impacted mortgage serviceability, reducing borrowing capacity. Now, APRA has proposed removing HELP debt from debt-to-income ratio reporting and allowing more flexibility in what lenders include in their serviceability assessments, especially for near-cleared debts. ASIC will also update its guidance for non-bank lenders.
These changes could increase borrowing capacity and help first home buyers enter the market sooner.
Investors step up
While the regulatory changes regarding HELP debt are opening doors for some, not everyone can immediately transition to homeownership. For those Australians who are unable to buy a home, investors are playing an important role in adding much-needed supply to the rental market.
This is reflected in the fact that new loan commitments by investors between the December 2023 and 2024 quarters grew by 13.2% to 48,876, according to the Australian Bureau of Statistics. Comparatively, owner-occupier loan commitments increased by just 4.0%.
It seems likely that this growth is due to investors recognising the potential for strong returns in a market characterised by low rental vacancy rates and increasing demand.
Additionally, the prospect of strong capital growth, with most markets forecast to increase in value over 2025 and 2026, offers good growth opportunities for investors.
Looking to buy a new property? Whether you are an investor capitalising on the tight rental market or a first home buyer taking advantage of increased borrowing capacity, as an expert buyer’s agent, A Game Property Advisory can help you secure a quality property at a good price. Get in touch with Jim by calling 0422 446 170 or emailing jim@agameadvisory.com.au.
Looking to buy a quality investment property? As an expert buyer’s agent, A Game Property Advisory can help you secure a quality property at a good price. Get in touch with Jim by calling 0422 446 170 or emailing jim@agameadvisory.com.au.