Except for Hobart, all cities recorded falls in vacancies for the first month of 2021.
"There is more evidence the worse is over for landlords in the Sydney and Melbourne rental markets," said Louis Christopher, Managing Director of SQM Research.
"The falls in vacancy rates for the month in those two cities, combined with the increased tightness in other cities and regions, has now brought rental vacancy rates down to below where they were prior to the outbreak of Covid19.
"Now, to be clear, CBD rental vacancy rates in both Sydney and Melbourne remain elevated, despite recent falls. And we remain of the view that there will not be a complete reversal of the sharp rise in rental vacancy rates experienced in these locations in earlier 2020.
"Demand for inner-city property will remain affected by the closure of the international border as well as ongoing caution on future city lockdowns.
"This will mean 2021 will remain largely a tenant's market in the inner cities but will also very much remain a landlord's market for regional Australia."
According to SQM Research, Melbourne's vacancy rate decreased in the month to stand at 4.4% and continues to record the highest vacancy rate for any of the capital cities. This time last year, Melbourne's vacancy rate was low at 2.1%.
Sydney also recorded a fall in vacancies over January, with the rental vacancy rate sitting at 3.2%. Again, sharp falls in rental were recorded in the CBD rental market, whereby vacancy rates fell to 6.2% after being as high as 16% in May 2020.
Over the past 30 days to 12 February, capital city average asking rents increased 0.7% for both houses and units to record asking rents of $552 per week for houses and $413 per week for units.
The majority of capital cities recorded increases in both house and unit asking rents, with Sydney recording the highest increase of 3.2% over the period for houses and 2.2% in unit asking rents.
Melbourne continued to record declines in both house and unit asking rents over the month, falling by 0.1% and 0.4% respectively. Interestingly, rents slightly rose in the CBD for units, a sign that the worse could be over for CBD landlords.