Queensland's rental market is currently facing the tightest conditions since the global financial crisis as vacancy rates continue to shrink, according to the latest market report from the Real Estate Institute of Queensland (REIQ).

Roughly 70% of the state's rental markets have "extremely tight" conditions, with the regional market outperforming major metropolitan areas when it comes to rental demand.

Antonia Mercorella, CEO of REIQ, said any further tightening in the rental availability will place undue pressures on the state's housing sector.

"This is why more needs to be done to better support both increased and ongoing property investor activity in the Queensland property market and the contributions they make to the state economy," she said.

According to REIQ, around one in three people living in the state is renting. With vacancy rates at their lowest, Mercorella said it will be hard for others to find an affordable home.

"Every Queenslander should have access to a safe, secure and affordable home that meets their needs and supports them," she said.

In fact, 18% of Queensland regions have less than 1% vacancy rate. Some of the lowest vacancies are in Maryborough (0.4%), Fraser Coast or Mount Isa (0.5%), Gympie (0.9%), and Rockhampton (0.7%).

Conditions are also tight in many popular regions including Caboolture (1.2%), Fraser Coast (1.2%), Mackay (1.3%), Sunshine Coast (1.9%), and Townsville (1.7%). Vacancies are higher in Cairns (2.4%), Gladstone (2%), and Noosa (2.4%), albeit only marginal.

"Limited rental supplies have the potential to result in poorly matched housing preferences and impact the urban spatial structure and functioning of these same regions — such as transport costs, labour markets and access to services and amenities," Mercorella said.

This also indicates a decline in government investment in social housing with more low-income renters in the market.

Mercorella believes this also suggests that Queensland's rental market has evolved from a transitional housing sector for people moving into homeownership to a long-term housing sector for a significant number of Queensland households.

"It's for these reasons rental vacancies can actually act as a barometer that measures the health of our property market," she said.

The state's only "weak" rental market can be found inside Brisbane's five-kilometre city-circle, where the vacancy rate is at 3.9%. Significant postcodes have substantially higher vacancies.

Mercorella said Brisbane has been hit harder due to the impacts of COVID-19, making it likely to see a drop in rents. This, in turn, will result in tenants eventually returning to the city.

"However, much of it will also depend on the commercial and retail sector's ability to rebound. It's very much a 'watch this space' situation unlike anything we've ever experienced," she said.