The number of properties available for rent in Australia has recorded its largest drop in over a year in August, falling to a new low of 1.1%, according to a new report.

PropTrack's Rental Vacancy Rates report for August revealed that the share of vacant rental properties is now 54% lower compared to the start of the pandemic.

In Sydney, vacancy rates fell to 1.26%, while Melbourne vacancy rates dropped to 1.19%.

Brisbane's vacancy rates plummeted to 0.84%, while Adelaide and Perth remain the tightest rental markets in the country, with vacancy rates sitting below 0.7% in both cities.

PropTrack economist and report author Anne Flaherty said the situation is unlikely to improve any time soon.

"There are no signs rental conditions are easing, with the vacancy rate now sitting below 1% in three of Australia's capital cities," she said.

"Across Australia, the share of available rental properties has fallen by more than half since the start of the pandemic.

"Rents are predicted to continue rising off the back of these incredibly low vacancy rates, which are driving up competition for properties." 

The limited supply of rentals is in part due to landlords increasingly taking their properties off the rental market, as the costs associated with being an investor have increased. 

Recent PropTrack analysis found that investors are making up around one-third of new listings hitting the market, which is close to the peak seen during the pandemic.

According to the most recent Your Investment Property survey of residential property investors, over a third of investors surveyed said they are considering selling.

This marks the third quarter where there has been an increase in the number of investors considering selling.