What is the vacancy rate and why does it matter?

Every now and then you might hear the term vacancy rate bandied about in real estate commentary, but what does it mean for investors and renters, and why exactly does it matter?

Here’s an insight into what the vacancy indicates and how it impacts renters, rental owners and potential investors alike.

The vacancy rate

In short, the vacancy rate indicates the percentage of all rental properties that are currently vacant and available.

It’s a key figure for all parties in the rental process;  whether you’re looking to rent, own an investment property or are considering buying one in a specific area.

In a balanced market, the vacancy rate is usually around 3 per cent. Any higher than that indicates there might be more properties than renters, so a property could potentially sit vacant longer and command a lower rental price.

If the vacancy rate is lower than 3 per cent, it indicates a tight market where renters are competing for available properties and rental prices might be rising.

The current vacancy rate

The most recent data from Domain indicates the current national vacancy rate is just 1.1 per cent, which is the lowest it has been since 2017 when their records began.

This is just the overall national figure with some specific regional areas and capital cities much, much lower than that.

In fact, Domain’s data currently notes Hobart and Adelaide have the lowest vacancy rates of all the capitals at 0.2 per cent and 0.3 per cent respectively.

Domain goes on to describe this as indicative of a rental crisis where the choice of available properties for renters is limited, and many struggle to actually secure a property to rent.

What a low vacancy rate means for renters

As mentioned, a low vacancy rate is a challenge for renters hoping to secure a property. It means each property that hits the market will likely have multiple applicants, and inevitably people miss out.

The top tips for navigating a tight rental market with a low vacancy rate include:

  • Ensuring you have a good rental record
  • Starting the rental search early
  • Having your application ready to submit
  • Lining up your references and referees in advance
  • Being as flexible as possible with your needs and requirements

What a low vacancy rate means for rental owners

For rental owners, a low vacancy rate is usually seen as a positive market indicator. 

It means your property is likely to command a good rental price, will not sit vacant for long and will attract numerous rental applicants.

That said, it’s important to remember all rental markets can fluctuate, and despite properties being in demand, a rental owner still has specific obligations they need to meet under the law.

What it means for prospective investors

If you’re considering buying an investment property, a low vacancy rate is something to look for. It indicates any property you purchase is likely to easily attract a tenant.

However, as we have noted above, it’s also important to appreciate that rental markets can and do fluctuate, depending on economic conditions, available employment in the area and a range of other factors.

If you are considering purchasing make sure you do your due diligence, looking at the amenities of the area, employment prospects, rental demand, demographics and more.

How we can help

Our experienced property managers pride themselves on establishing great relationships with both rental occupiers and owners.

We manage every property as if it were our own and you can learn more about our property management services here.

Alternatively, if you are looking to rent a property, you can view the properties we currently have available here