Rent prices are set to increase further as vacancy rates continue to tumble. However, there are still some suburbs close to the CBD where median rents are considerably lower than their capital city average.

New PropTrack data shows national rental vacancy rates fell to an historical low of 1.06% in September.

Sydney and Melbourne saw the largest yearly declines with vacancies down 0.31% and 0.69% in the past 12 months while Adelaide and Perth currently have the fewest vacant rentals among all capital cities.

While it paints a grim picture for renters, PropTrack data shows there are suburbs close to our cities where rents are still relatively affordable.

These 'inner-ring' suburbs are located within the nearest third to their respective CBDs.

Inner-ring suburbs with the lowest median weekly rent - houses

The biggest discounts for houses were seen in Brooklyn and Braybrook, both less than 11kms away from the Melbourne CBD, with renters paying $440 and $450 per week respectively, compared to the capital city median of $500 per week.

Situated within 8kms of Adelaide city, houses in Kilburn and Croydon Park were also relatively affordable. Weekly rents were $450 and $480 respectively which is well below the city's median of $520.

Inner-ring suburbs with the lowest median weekly rent - units

For units, Caulfield East, Kingsville and Gardenvale located close to Melbourne CBD, had rents ranging from $315 to $340 per week. With median rents in Melbourne currently at $480, these suburbs are much more accessible to renters.

Brooklyn Park and Kurralta Park in Adelaide had some of the most affordable rental units as well.

The tightening of the market can be attributed to several factors.

One is the decline in household size. From late 2020 to August 2022, average households fell from 2.55 people to 2.48 people. Single-person households increased as well.

Suburbs in Melbourne's West were some of the most affordable in the country. Picture: Getty

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While this trend has reversed in recent times following limited vacancies and a surge in rental prices, household sizes remain below pre-pandemic times which means that demand for homes is much higher.

The recovery in migration is also contributing to heightened levels of demand, particularly near city centres, where many migrants tend to reside.

Another factor is the shortfall in the supply of new homes. Since March 2021, the number of dwelling approvals has been trending downwards. Delays in construction brought about by material shortages have also slowed the completion of new homes.

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These supply and demand dynamics are driving up prices and making it difficult for renters. Those looking in capital cities may find it especially tough as vacancies have decreased more over the past year.

Rents are expected to continue rising as demand remains at elevated levels, supply hovers at historical lows and new homes take longer to build.

While recent increases in investor activity may bring some reprieve, conditions are unlikely to improve significantly in the short term.

More insights from the expert team at PropTrack