Australia’s Rental Squeeze is Intensifying

Recent figures from Cotality show a fresh reacceleration in rental growth across Australia, driven by extremely tight vacancy rates, strong migration, and ongoing rental supply shortages. While every capital city has its own story, the common theme is clear: demand continues to outpace supply.

For property investors, the market is entering another phase where strategy and management matter more than ever.

Melbourne: LongView Continues to Outperform the Market

Melbourne remains the most affordable mainland capital city, but conditions are tightening, particularly in inner-city locations where rental demand is strengthening again.

Across the broader Melbourne market, rents increased by an annualised 2.3% this quarter. However, LongView-managed properties outperformed that benchmark, achieving a 3.2% annualised increase across our portfolio.

At the same time, vacancy rates remain critically low at 1.5%, unchanged from March 2025. While there is visible construction activity across Victoria, new supply still isn’t replacing the rental stock leaving the market.

Victoria accounted for roughly one-third of national home completions in the most recent quarter, yet rental availability remains constrained. A major reason is the continued exit of investors from the Victorian market.

We estimate approximately 25,000 rental properties have left the Victorian rental pool over the last 18 months, the first net decline in rental supply seen in more than two decades.

Between increasing holding costs, including the COVID debt levy, and ongoing regulatory reforms, many investors have chosen to sell. The result is that Melbourne rental listings remain roughly 21% below the five-year average despite the volume of new construction.

The broader sentiment reflects this shift. A recent REIV survey found that 81% of Victorians believe current tax and regulatory settings are discouraging investment in rental housing. You can view for full survey here

Brisbane: Strong Growth Continues

Brisbane remains one of the country’s most resilient rental markets, supported by strong population growth and consistently low vacancy.

Across LongView’s Queensland portfolio, rents increased by an annualised 7.2%, continuing the strong momentum seen throughout the market.

Vacancy rates have tightened further to 1.7%, down from 1.8% this time last year. While the movement may appear small, in already constrained markets even minor declines in vacancy can place significant upward pressure on rents.

Brisbane continues to benefit from affordability relative to Sydney, interstate migration, and strong demand from renters relocating, lifestyle and employment opportunities.

Sydney: The Scarcity Story

Sydney remains Australia’s most expensive rental market, but the key issue isn’t just pricing, it’s the shortage of available stock.

Rents rose 1.9% over the quarter, equating to an annualised increase of 7.6%, while vacancy rates tightened from 2.0% to 1.8% over the past year.

Perhaps the most important figure is supply. Rental listings in Sydney are currently 27.4% below the five-year average, indicating that pressure on rents is unlikely to ease anytime soon.

Why the Supply Crunch is Intensifying

The current rental environment is being driven by what many describe as a “perfect storm.”

The first factor is migration. Net overseas migration remains elevated at approximately 400,000 people annually, with the majority settling in Sydney, Melbourne, and Brisbane. This creates immediate demand for rental accommodation.

The second factor is declining investor participation, particularly in Victoria. As more investors exit the market, rental supply shrinks even as population growth accelerates.

The combination of rising demand and falling rental stock keeps vacancy rates at historically low levels across the country.

Affordability is Changing Renter Behaviour

Affordability is now becoming one of the strongest influences on leasing trends.

We are increasingly seeing renters adjust their expectations and move toward smaller or more affordable housing options. Unit rents are currently growing faster than house rents nationally as renters prioritise budget management.

With vacancy rates sitting at roughly half their pre-pandemic levels, rental yields are expected to continue strengthening throughout 2026.

What This Means for Investors

While market conditions remain favourable for rental growth, this environment also requires balance.

The strongest long-term outcomes rarely come from simply pushing rents as high as possible. Successful property management is about understanding market timing, tenant retention, and sustainable rental growth.

At LongView, our focus remains on helping clients navigate this cycle strategically maximising returns while retaining high-quality renters and minimising vacancy.

Because in tight markets like these, strong management becomes a competitive advantage.