Plans to increase migration into Australia could cause rents to increase further.

CoreLogic Head of Research Tim Lawless says the market is already experiencing dramatic rent increases as a result of a national vacancy rate of just 1%.

With the Federal Government indicating it wants to fill labour shortages by increasing migration, Lawless says this will put further pressure on the rental market.

“Migrants traditionally move straight to the cities and they move first to the rental market,” he says. “It’s the factor still missing in the residential sector even with the rebound in rents.”

He says the rental market nationally was subdued for almost a decade but that has now dramatically changed.

“Now the wheel has turned, we are seeing rental yields climbing very quickly. Falling house prices and rising rents are an unusual combination – in cities such as Sydney rental yields had dropped near 2%, we are now seeing them climb towards 3% and they could get to 4%.”.