Australian renters will escape last year’s horrific price increases in 2024 as vacancy rates ease slightly but will still be squeezed as “pretty tight” conditions persist nationwide, a leading analyst says.

The national rental vacancy rate ticked up to 1.12 per cent in December, according to figures published on Friday by research group Proptrack.

PropTrak senior economist Eleanor Creagh said the December rise delivers “small relief” for renters as it suggests some easing in conditions, particularly across Sydney.

But vacancies are still near historic lows, ending the year 0.13 percentage points lower, signalling ongoing pain amid a chronic imbalance between demand and supply that has no short-term solutions, Creagh said.

“[The] rental supply is really the critical fix here, and there isn’t anything on the horizon that suggests it will increase significantly.”

The pace of rent growth began to stabilise towards the end of last year as the near 40 per cent rise in prices since COVID-19 began to test the limits of what tenants across the country could afford.

Domain figures released this week showed that median rents had stalled over the December quarter for the first time in three years.

It’s cold comfort though because at $600 a week, median national house rents still remained at a record high.

In other words, while renters will likely escape the same degree of price increases seen in 2023, this year will only provide slight relief, with rents unlikely to go backwards so long as demand continues to outstrip available supply.

Conditions across the capitals

Sydney saw vacancy rates tick up 0.09 percentage points to 1.37 per cent in December, while vacancies were unchanged in Melbourne, with the rate rising 0.01 percentage points to 1.18 per cent.

Brisbane’s rental market rose 0.02 percentage points in December to 0.9 per cent.

In Adelaide and Perth, the vacancy rates were 0.69 per cent and 0.73 per cent respectively.

Creagh said higher migration rates since COVID-19 were exacerbating pre-existing housing shortages in major cities.

Easing rent growth positive for rates

The prospect of slower rent growth is good news for the interest rates outlook, with housing costs being a key concern for the Reserve Bank heading into 2024 because rents ultimately feed into headline inflation data.

Consumer price data published by the ABS this week for last November showed rents rose 7.1 per cent in the month, which is much higher than the 2-3 per cent target band the central bank targets for price increases.

A slowing in rent growth should temper services inflation moving forward, encouraging a growing number of economists to predict the RBA will hold rates when they meet in early February.