Australia's Apartment Shortage Crisis: Why CBRE Forecasts Rents Will Surge 27% by 2030

Australia’s rental market is about to get significantly worse. That is the blunt conclusion of CBRE’s latest Apartment Vacancy, Rent and Price Outlook report, released in late March 2026, which forecasts a 27% increase in median apartment rents across capital cities by 2030.

The report paints a picture of a housing market in which chronic undersupply, strong population growth, and constrained construction combine to push vacancy rates to historic lows and rents to levels that would have seemed unthinkable just a few years ago.

For renters, investors, first home buyers, and property professionals, the data demands attention. Here is what the report says, what is driving the crisis, and what it means for your financial decisions.

The CBRE Forecast: Key Numbers

CBRE analysed 53 key capital-city precincts across Sydney, Melbourne, Brisbane, Perth, and Adelaide to produce its apartment outlook. The headline findings are sobering:

A balanced rental market typically has vacancy rates of 4% to 5%. At 1.1%, the market is so tight that renters have virtually no bargaining power, competition for available properties is fierce, and landlords can increase rents with confidence that tenants have few alternatives.

The Supply Crisis: Not Enough Apartments Being Built

The fundamental problem is straightforward: Australia is not building enough homes to house its growing population. The shortfall is particularly acute in the apartment sector, where high-density construction has faced a perfect storm of obstacles.

Construction Costs Have Soared

Building costs have increased approximately 40% since 2020, driven by global supply chain disruptions, domestic labour shortages, and more recently, the impact of Middle East conflict on energy and materials costs. Steel, concrete, timber, and glass have all seen significant price increases.

CBRE’s report notes that apartment values have not kept pace with construction costs over the past five years, with the gap sitting at approximately 20%. This means developers cannot profitably build new apartments at current sale prices in many locations, which suppresses new supply.

“In our view, capital values for residential projects will accelerate significantly higher to ensure a healthy ecosystem for developers,” CBRE states. In other words, apartment prices need to rise substantially before construction becomes viable again in many markets.

Interest Rates Are Squeezing Development

With the RBA cash rate at 4.10% following two consecutive hikes in February and March 2026, development financing costs have increased dramatically. A developer who could borrow at 3.5% in 2021 is now paying 6.5% to 7.5% for construction finance, adding hundreds of thousands of dollars to the cost of a typical apartment project.

Higher rates also suppress pre-sales, which developers need to secure before banks will fund construction. Fewer buyers can qualify for mortgages at current rates, meaning fewer pre-sales, meaning fewer projects reaching the construction stage.

Planning and Approval Delays

Every Australian state has planning and approval processes that add 12 to 36 months to project timelines. State and local government reforms to speed up housing approvals have been announced in NSW, Victoria, and Queensland, but the effects are yet to meaningfully flow through to construction starts.

The National Housing Accord target of 1.2 million new homes by 2029 is widely regarded as unachievable. The Housing Industry Association (HIA) and Master Builders Australia have both warned that current construction rates fall well short of the trajectory needed.

Labour Shortages

The construction industry faces a shortage of approximately 90,000 workers nationally, according to Master Builders Australia. Skilled tradespeople, particularly in high-rise construction (formworkers, crane operators, glaziers, and façade installers), are in exceptionally short supply. Training pipelines take three to four years to produce qualified workers, meaning the shortage will persist through at least 2028.

City-by-City Breakdown

Sydney

Sydney faces the starkest mismatch between supply and demand:

Sydney’s median unit rent is already above $650 per week for a two-bedroom apartment in most inner and middle-ring suburbs. CBRE’s forecast of a 27% increase would push this toward $825 per week by 2030, or approximately $42,900 per year in rent for a two-bedroom apartment.

For context, a household would need a gross income of approximately $143,000 per year to keep that rent below 30% of income (the standard measure of rental affordability).

Melbourne

Melbourne’s apartment market has historically been better supplied than Sydney’s, thanks to a large pipeline of inner-city high-rise developments over the past decade. However, that pipeline has dried up as construction costs and financing challenges have taken hold.

Melbourne’s shortfall is the largest of any capital in absolute terms. While the city has benefited from lower median rents than Sydney (approximately $520 per week for a two-bedroom apartment), CBRE expects rapid convergence as vacancy tightens.

The Bayside area (Brighton, Hampton, Black Rock, Cheltenham, Mentone) is flagged as a particular hotspot for vacancy tightening, driven by strong demand from downsizers and professionals seeking lifestyle-oriented apartment living.

Brisbane

Brisbane is forecast to have the tightest vacancy rate of any capital by 2030:

A 0.7% vacancy rate is extraordinary. It means that for every 1,000 rental apartments, just 7 are available at any given time. Brisbane’s continued population growth, driven by interstate migration and the lead-up to the 2032 Olympics, is expected to sustain strong rental demand throughout the forecast period.

Perth and Adelaide

Both smaller capitals are also forecast to see tightening vacancy and rising rents, though from different starting points:

• Perth: Vacancy around 1.0% currently, forecast to tighten to 0.8% by 2030. Strong resources sector employment continues to drive population growth.
• Adelaide: Vacancy around 0.8% currently, already among the tightest in the country. Limited new apartment supply and steady demand from defence industry workers and international students.

What Is Driving Demand

Population Growth

Australia’s population is projected to grow by 4.4 million people over the next decade, with immigration accounting for approximately two-thirds of the increase. Net overseas migration has been running at approximately 400,000 to 500,000 people per year since pandemic borders reopened, significantly above the pre-pandemic average of approximately 240,000.

While the government has announced plans to moderate immigration levels, even reduced migration of 300,000 per year would still require approximately 120,000 new homes annually (assuming an average household size of 2.5 people), well above current construction rates.

Employment Growth

CBRE forecasts the Australian workforce will grow to 17.6 million people by 2035, up from approximately 14.5 million today. More workers means more households, more housing demand, and more competition for rental properties, particularly in CBD and inner-suburban locations where apartment living is concentrated.

Income Growth

Average annual incomes are forecast to increase from approximately $105,000 today to around $144,000 by 2035. Rising incomes increase the capacity to pay higher rents, which supports further rent growth. CBRE estimates this combination of population, employment, and income growth could add approximately $1 trillion in additional income to the economy over the next decade.

Shifting Preferences

Apartment living is becoming more popular, not just because houses are unaffordable but because lifestyle preferences are changing. Younger Australians increasingly value inner-city amenity, walkability, and proximity to work. Downsizers are moving from large family homes to apartments. These trends increase apartment demand independently of population growth.

What This Means for Renters

The outlook for renters is challenging. If CBRE’s forecasts prove accurate, renters face:

• 27% higher rents by 2030, compounding on top of the 30% to 50% increases already experienced since 2020 in many markets.
• Intense competition for available properties, with open inspections attracting dozens of applicants and properties being leased within days of listing.
• Reduced mobility, as moving from one rental to another becomes more expensive and stressful when vacancy is this low.

Strategies for Renters

1. Lock in longer leases if your landlord is willing. A two-year lease at a fixed rent provides certainty and protection against annual increases.
2. Consider rentvesting. If you cannot afford to buy where you want to live, consider buying an investment property in a more affordable area while continuing to rent where you want to live. This allows you to build equity and benefit from capital growth while maintaining your lifestyle.
3. Explore share housing. With two-bedroom apartment rents heading toward $700 or more per week, sharing with a housemate reduces costs significantly.
4. Look at middle and outer suburbs. Vacancy rates tend to be slightly higher in suburbs further from the CBD, and rents are lower.
5. Budget for increases. If you are currently paying $500 per week, plan for the possibility of paying $600 to $635 within three to four years.

What This Means for Investors

For property investors, the CBRE data presents a strong case for apartment investment, particularly for those with a medium to long-term horizon.

The Investment Case

• Vacancy at 1.1% means near-guaranteed occupancy. An investor is unlikely to experience extended vacancy periods, providing reliable rental income.
• Rent growth of 27% over five years translates to approximately 4.9% annual rent growth, well above the long-term average of 2% to 3%.
• Capital growth of 28% over five years (approximately 5.1% annually) provides strong total returns when combined with rental yield.
• The gap between construction costs and apartment values (currently 20%) suggests values must rise to restore developer margins, providing a structural floor under prices.

Where to Invest

Based on CBRE’s precinct-level data, the strongest opportunities are in areas with:

• The steepest forecast falls in vacancy rates
• Proximity to employment centres
• Limited new supply pipelines
• Strong demographic demand (downsizers, professionals, students)

Sydney’s Eastern Suburbs, Lower North Shore, and Parramatta stand out, along with Melbourne’s Inner East and Bayside. Brisbane’s CBD and South East offer the tightest vacancy forecasts.

Risks to Consider

• Interest rates remain high. At a 4.10% cash rate, variable mortgage rates are approximately 6.2% to 6.8%. This squeezes cash flow on investment properties, particularly those with low initial yields.
• APRA’s DTI caps (debt-to-income ratio restrictions) may limit borrowing capacity for investors, particularly those with multiple properties.
• State government rental reforms in Victoria, Queensland, and NSW have introduced or proposed rent increase caps, mandatory minimum standards, and restrictions on no-grounds evictions. These reduce investor flexibility and may deter some from the market.
• Construction cost declines could increase supply. If construction costs moderate (which some forecasters expect from 2027 onwards), the supply shortage could ease faster than CBRE projects.

What This Means for First Home Buyers

For first home buyers, the data presents a dilemma. With apartment values forecast to rise 28% by 2030, waiting to buy means paying significantly more later. But with interest rates at 4.10% and prices already high, buying now requires stretching budgets and accepting higher mortgage repayments.

The Maths of Waiting

Consider a two-bedroom apartment currently valued at $600,000:

Waiting four years could cost an additional $850 per month in mortgage repayments, or $10,200 per year. And that assumes interest rates don’t rise further.

First Home Buyer Options

1. Use government schemes. The First Home Guarantee allows eligible buyers to purchase with a 5% deposit without paying lenders mortgage insurance (LMI). The Regional First Home Buyer Guarantee provides similar support for regional purchases.
2. Consider apartments. While many first home buyers aspire to a house, apartments offer a more affordable entry point and, based on CBRE’s forecasts, strong growth potential.
3. Look at emerging precincts. Suburbs with planned infrastructure investment (new train stations, hospital upgrades, university campuses) tend to see above-average capital growth.
4. Get pre-approved early. In a tight market, having finance pre-approved means you can act quickly when the right property comes up.

The Policy Response

Both federal and state governments have acknowledged the housing supply crisis, but the policy response has been criticised as too slow and too fragmented.

Key current and proposed measures include:

• National Housing Accord: Target of 1.2 million new homes by 2029, widely regarded as unachievable at current construction rates.
• Housing Australia Future Fund: $10 billion fund to finance social and affordable housing construction.
• State planning reforms: NSW, Victoria, and Queensland have all announced reforms to speed up development approvals, including medium-density housing provisions and reduced red tape for build-to-rent projects.
• Build-to-rent tax incentives: The federal government has reduced the withholding tax rate on eligible build-to-rent projects from 30% to 15% for foreign investors, aimed at attracting institutional capital into rental housing.

Whether these measures will meaningfully close the supply gap remains to be seen. Most housing economists believe the shortfall will persist through at least 2028 to 2029, with the effects on rents and vacancy rates playing out as CBRE forecasts.

The Bottom Line

Australia’s apartment market is heading into a period of acute undersupply that will push rents higher, tighten vacancy further, and drive apartment values up significantly. For renters, it means budgeting for meaningful increases. For investors, it presents one of the strongest rental yield and capital growth environments in a decade. For first home buyers, the cost of waiting is growing.

Whatever your position in the market, making informed decisions based on data, not sentiment, is critical.

How WealthWorks Can Help

Whether you are a renter exploring rentvesting strategies, an investor assessing apartment opportunities, or a first home buyer trying to get into the market, the right professional advice can make a significant difference.

Find a mortgage broker on WealthWorks to model your borrowing capacity, compare lenders, and find the right loan structure for your situation. Or find a buyer’s agent who can help you identify the best opportunities in your target market. All professionals on WealthWorks are verified and ready to help.