Market Update
The rental squeeze that defined the past three years is loosening. Cotality reported this month that the combined capital city vacancy rate jumped to 2.4 per cent in October, a five-year high, while SQM Research puts the national rate at about 2.3 per cent, the highest since January 2022. For property investors, the question is no longer whether rents can keep climbing at pace. It is whether the numbers still work now that the RBA has lifted the cash rate to 4.85 per cent.
For first home buyers and upgraders, the same data carries a different message: renting is getting a little easier to find and a little cheaper to hold, which changes the maths of when to buy. Here is what the latest figures show and how we are reading them for borrowers anywhere in the country.
The latest readings from three data providers point in the same direction, even though their methods differ. Cotality's October figures show vacancy rising to 2.4 per cent across the combined capitals and annual rent growth of roughly 5.2 per cent, down from around 6.0 per cent in the May to July period. PropTrack's September report recorded national vacancy of 1.5 per cent, up from 1.3 per cent in the June quarter and the highest reading since February 2022, with the median advertised rent hitting a record $675 a week, up 1.5 per cent over the quarter and 5.5 per cent over the year.
| Measure | Source | Latest reading |
|---|---|---|
| Capital city vacancy (October) | Cotality | 2.4%, five-year high |
| National vacancy (October) | SQM Research | 2.3%, highest since January 2022 |
| National vacancy (September) | PropTrack | 1.5%, up from 1.3% |
| Annual rent growth (October) | Cotality | About 5.2% |
| Median advertised rent (September) | PropTrack | $675 a week, up 5.5% on the year |
| National gross rental yield (October) | Cotality | 3.92%, highest in more than seven years |
The vacancy figures differ because each provider counts listings and measures periods differently, so compare the direction of travel rather than the absolute levels. SQM notes the national rate remains well below the pre-COVID decade average of 3.3 per cent. In other words, the market is looser but not loose.
A gross yield of 3.92 per cent sounds like good news for landlords, and in one sense it is. But the lift is being driven mostly by falling property values rather than surging rents. With national dwelling values down for several consecutive months, the same weekly rent now sits against a lower purchase price, so the yield arithmetic improves.
That distinction matters when you are borrowing. A 3.92 per cent gross yield is still well below the interest rate on a typical investment loan. On a $700,000 investment property at that yield, gross rent is roughly $27,400 a year, while interest alone at a rate near 6.5 per cent would be about $45,500 on a loan of the full amount. Most investors are therefore still negatively geared, and the gap is funded from their own income.
Cash flow, not headline yield, is what lenders test. With the cash rate at 4.85 per cent after the RBA's November decision, assessment buffers mean rental income is shaded before it is counted, so a softer rental market directly trims borrowing capacity for investors.
If you are buying an investment property, model rent at a conservative level and allow for several weeks of vacancy each year. Lenders already apply a haircut, typically counting 70 to 80 per cent of gross rent, so your own cash flow plan should be at least as cautious as the bank's.
SQM's data shows quarterly asking-rent growth near zero for units and just over 5 per cent for houses. Units, particularly in capitals with heavy new supply, are where tenants have the most choice. Houses and well-located regional stock are holding up better. Investors weighing a purchase in Sydney, Melbourne, Brisbane, Perth or a regional centre should look at local vacancy and stock-on-market data, not the national headline.
For existing landlords, higher variable rates and slower rent growth tighten cash flow from both sides. Reviewing your rate, offset account and loan term, or refinancing to a sharper lender, is often the fastest way to recover some of that margin. Our split calculator lets you compare interest-only and principal and interest scenarios side by side.
Easier rental availability reduces the urgency that drove many buyers to stretch their budgets in 2024 and 2025. Tenants have more choice and less competition at inspections, which gives savers more room to build a deposit without panic buying. Meanwhile, auction clearance rates have softened and vendor discounting has increased in several capitals, so buyers who are pre-approved are in a stronger negotiating position than a year ago.
Upgraders who plan to keep their current home as an investment should note the other side of the ledger: a higher vacancy rate and slower rent growth reduce the rental income a lender will count, which can reduce the amount available for the next purchase. Getting your serviceability assessed early, before you sign a contract, avoids unpleasant surprises.
The next signals are the RBA's 8 December decision, the November vacancy readings from Cotality and SQM, and PropTrack's December quarter rent report. If vacancy continues to climb while rate rises continue, the pressure on leveraged investors will build. If the RBA pauses and values stabilise, the improved yields could begin to attract buyers back into the market.
Not necessarily. Cotality still reports annual rent growth of around 5.2%, and PropTrack's median advertised rent reached a record $675 a week in September. Higher vacancy points to slower growth rather than falling rents, and the picture differs by city and by houses versus units. Borrowers should avoid assuming either a rent spike or a rent drop when testing an investment.
Most lenders shade rental income, commonly counting 70 to 80 per cent of the gross rent, to allow for vacancy, agent fees and maintenance. They then apply an assessment rate well above your actual rate. With the cash rate at 4.85%, that buffer matters, so the same property can support different borrowing amounts at different lenders. A broker can compare policy across lenders before you commit to a purchase.
It depends on your deposit, your job security and how long you plan to stay. Easing rents reduce the cost of waiting, while softer prices and vendor discounts may reduce the cost of buying. Neither side is a clear winner nationally. The sensible step is to get your borrowing capacity assessed under current lender buffers so you know your real position before you decide.
Disclaimer: This article is general information only and does not constitute financial, mortgage or credit advice. Data is drawn from Cotality, PropTrack and SQM Research releases and differs by provider and period. Before making any decision about an investment purchase, refinance or loan structure, speak with a qualified professional who can consider your personal circumstances.
Whether you are buying your first home, upgrading or reviewing an investment portfolio, book a call with a Mankin Finance broker. With 140+ five-star Google reviews, we will compare lenders across Australia and model your numbers.
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