What is vacancy rate and why does it matter?

Vacancy rate is calculated as: number of rentals advertised but unoccupied ÷ total rental stock. NSW Fair Trading and the ABS publish vacancy + rental-stock figures by postcode + suburb; multiple research desks aggregate the same primary signal. Different sources differ slightly in methodology; the directional signal is reliable.

Tight vacancy (< 2%) means landlords have pricing power, rents rise faster than CPI, lease renewals trend upward. Over the past 3 years, Sydney + Brisbane + Adelaide have run sub-1.5% vacancy, driving 8-15% annual rent growth. Perth + Hobart spiked to similar tightness later. Investors use vacancy + days-on-market as the leading indicator of yield direction.

Loose vacancy (> 5%) means landlords have less power, rents flat or falling, longer days-on-market, more concessions (free month, lower deposit). Inner-Melbourne CBD saw 8-9% vacancy in 2021-22 from supply absorption + remote-work migration; rents fell 10-15% from 2019 peaks before recovering.

What 'matters' depends on horizon: vacancy is a leading indicator (3-12 months ahead of rent moves), not a lagging one. By the time vacancy is making news, the rent cycle is well underway. For investors the question is which suburbs are about to compress vacancy (supply is tight + demand is rising) or about to release vacancy (supply is landing + demand is flattening).