Insurance insights

Low vacancy rates: impacts on tenants and landlords

Low vacancy rates can lead to strong competition among tenants, higher rents, and faster leasing times for landlords. But how do they affect insurance?

A vacancy rate measures the percentage of unoccupied rental properties in each area. According to Suburb Finder, a healthy vacancy rate sits at around three per cent, a balance between tenant demand and landlord supply. Rates below two per cent signal high demand and fierce competition among renters, while rates above four per cent give tenants more options and can place pressure on landlords.

With that in mind, we dive into a few of the most common questions we get about how vacancy rates can affect insurance, and what it all really means for you…

Where do vacancy rates currently stand?

Australia’s rental market stayed incredibly tight in October, with SQM Research reporting a national vacancy rate of just 1.2%. That is only around 36,000 rental properties available across the entire country.

What does this mean for tenants?

With rental demand still high, many people are finding it challenging to secure a lease. The good news is that, after several years of sharp rent increases, there are early signs that Australia’s rental market may be starting to stabilise, offering a bit of relief for tenants.

What about for landlords?

With vacancy rates below two per cent across all capital cities, the rental market continues to favour landlords. High demand and limited supply naturally put upward pressure on rents.

What should landlords be aware of?

Any rent increases must comply with state and territory laws, which regulate when and by how much rent can be raised. Landlords should also note new rules protecting tenants, such as restrictions on rent bidding. In most areas, asking for offers above the advertised price is now illegal (though tenants can still offer more voluntarily). Staying informed on these rules helps landlords remain compliant while making the most of current market conditions.

How does insurance fit into this?

Low vacancy rates do not just affect tenants and landlords – they can also have an impact on your insurance. This is what to keep in mind:

Rent increases

If you increase the rent on your investment property, it is important to let your insurer know so your cover stays accurate. Once the new rent is agreed, make sure your lease agreement and rent ledger are updated. These documents are essential if you ever need to claim for rental losses, as insurers calculate payouts based on the rent figure they have on record. Keeping everything consistent can save a lot of hassle later. It is also worth checking that the new rent is within your policy limits. For example, EBM RentCover policies currently cap cover at $1,500 per week. If the rent is higher, additional premium will apply.

Changing tenancy terms

Earlier this year, Victoria introduced a levy on short-term accommodation (like holiday rentals or Airbnb-style homes) to encourage property owners to switch to long-term leases and help ease the state’s low vacancy rates. And other states may follow. If you are moving your property from short-stay to a standard fixed-term lease, it is a good idea to check that your landlord insurance still matches your new setup. Different lease types come with different risks, and insurers often have separate policies for each. Having the right policy in place ensures you are properly protected and that your cover will respond as expected if you ever need to make a claim.

The bottom line

With vacancy rates at an all-time low, it is understandable that landlords are thinking about making the most of the current market. But before making any changes to your rental property make sure that you let your landlord insurance provider know. Not doing so can have consequences and can lead to a reduced payout, or even a denied claim, if something goes wrong. Keeping your insurer in the know helps to ensure your cover stays valid.

Wondering how a rent increase could impact your landlord insurance? The EBM RentCover team is here to help. Contact us on 1800 661 662.

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are here, contact 1800 661 662 if you have any questions.