A higher vacancy rate that may not last

realestate.com.au reported national rental vacancies at their highest level in four and a half years, and PIPA Chair Cate Bakos warned that investors leaving the market will put that improvement at risk.

What the vacancy data showed

Sarah Dowling reported on realestate.com.au on the 27th of August 2026 that the national rental vacancy rate rose 0.2 percentage points to 1.5 per cent in July, the highest level since February 2022. Capital city and regional vacancy rates were both 1.5 per cent. Vacancies rose over the month in Canberra, Melbourne and Sydney, while Darwin and Hobart remained below 1 per cent. Capital city vacancies are still 1.1 percentage points lower than five years ago, while regional vacancies are 0.4 points higher than five years ago, when the pandemic drove demand for regional living.

A balanced rental market is generally placed at a vacancy rate of 2.5 to 3.5 per cent. The national median rent reached a record $670 a week in the June quarter, up 3.1 per cent in three months.

Investor lending and rental supply

realestate.com.au senior economist Anne Flaherty explained that the recovery in vacancies came from increased investor buying over the past year. The number of new loans to investors in the twelve months to June 2026 was tracking at the highest level since the ABS began reporting the series in 2019. Those purchases have since been added to the rental pool.

The same investor activity has now fallen sharply. New investor loans dropped 8.6 per cent in the June quarter, and Ms Flaherty expects the rate at which new rental supply is added to slow. Ray White chief economist Nerida Conisbee explained the sequence: lower investor purchasing takes time to reduce rental supply, then to lift advertised rents, and then to appear in the consumer price index.

The July vacancy figure therefore reflects the supply added by investors before the budget. It does not yet reflect the months since.

Cate Bakos on rental supply

Cate Bakos, Chair of PIPA, told realestate.com.au that the cash flow constraints created by the budget changes have moved some investors from established capital city property toward regional centres with higher yields, or into units. Most, she said, have left the market.

The rental crisis we’ve been talking about for the past few years is about to be overshadowed by this calamity.

Cate Bakos, Chair of PIPA, quoted on realestate.com.au, the 27th of August 2026

She added that rents are already rising again and that pressure on tenants will intensify as investors exit and fewer buy. The article noted that the effect is expected to be greatest in middle ring capital city suburbs, where established homes make up most of the housing stock.

Implications for tenants and investors

For tenants, the current vacancy rate offers more choice than at any time since early 2022, and the available evidence suggests that choice may narrow as fewer investor purchases reach the rental market. For investors who remain, a tighter rental market supports rents, but the rent must still cover holding costs without the deductions that established purchases no longer attract. The lending data behind the change is covered in investor lending after the budget.

Advice for investors who remain

Most rental housing in Australia is supplied by private investors, many of whom rely on advice when they buy. An investor deciding whether to hold, sell or buy in the current market can search for a Qualified Property Investment Adviser who has met the QPIA education standard. PIPA’s advocacy work addresses the policy settings that affect rental supply.