Explainer: Rental price and vacancy metrics

Hot rental markets generated many popular news headlines during 2022. Australian news consumers have read that “Renters are getting smashed” in Melbourne, and that the rental market is “extremely challenging” in Sydney, and ever that “Renters competing 'Hunger Games-style' as number of rental properties dwindles”.These headlines are certainly very shocking, and no doubt attract clicks. As well as rental data, vacancy rates of rental property is a metric that is commonly quoted in media reports to provide insights into the economic processes happening in the rental market. “National vacancy rates hit record low” was an October 2022 headline. But like all economic data, reported rental prices and vacancy rates need to be properly interpreted. Understanding what these metrics mean in terms of underlying economics is tricky.This note explains how several different popular rental price and housing vacancy metrics are created and provides commentary on how they should be interpreted. A clear explanation of popular rental metrics shows how it can be simultaneously true that the rate of growth of rental prices for new contracts was at record highs in mid-2022, but the average rental price paid across all dwellings was still lower than in 2018. Often different metrics have similar names but measure different things, and subject to different errors and short-term variation, which means caution is needed to use them to interpret underlying economic processes. For example, rental vacancy measures the short-term variation in advertising for rentals and should not be assumed to measure the number of unoccupied dwellings across the housing market.