A vacancy rate is the percentage of rental properties in a given area that are currently untenanted and available for rent. It is one of the most important leading indicators for both rental income stability and future capital growth potential.
How vacancy rate is calculated. Vacancy rate = (Number of vacant rental properties / Total rental stock) × 100
What vacancy rates indicate:
Below 1–2%: An extremely tight rental market. Properties are let quickly, rental prices rise, and landlords have strong negotiating power. This environment supports rental income growth.
2–3%: A balanced rental market. Properties typically let within 2–4 weeks at asking rent. Neither landlords nor tenants have significant leverage.
Above 3%: A soft rental market with excess supply. Properties may take longer to let, rents may be under pressure, and landlords may face increased vacancies between tenancies.
Why investors track vacancy rates. A property in a 1% vacancy market is unlikely to sit empty between tenancies — the landlord can expect to re-let quickly at market or above-market rent. A property in a 5% vacancy market may experience extended vacancies and require below-market pricing to attract a tenant, eroding cash flow.
Source. Vacancy rate data is published monthly by CoreLogic, SQM Research, and REIQ. It is available at the suburb and local government area level.
Geographic variation. Vacancy rates vary significantly across suburbs within a single city. Investors should check the vacancy rate for the specific suburb, not just the city average.
