Perth's vacancy rate dropped to 1.7 per cent at the end of September. The fall comes after the vacancy rate decreased from 2.2 per cent in July to 1.9 per cent in August.
It is now at the lowest level since November 2024.
REIWA President Rob Mandanici said the decline was extremely concerning, with rental supply facing new constraints.
"Demand for rental properties remains strong. This is reflected in the low vacancy rate and properties leasing in a median of two weeks," he said.
"Unfortunately, we are seeing increasing challenges to supply and a further tightening of the market with the number of properties for rent in Perth dropping below 2,000 at the end of September. This is the first time they've fallen below 2,000 since March this year.
"Two years ago, the Perth vacancy rate started rising from a record low of 0.4 per cent in March 2024 due to an increase in supply, mainly as investor-owned house-and-land packages reached completion and came to the market.
"Unfortunately, we can't expect the same now. We have seen the response to the Federal Government's changes to taxation policy. Investors continue to sell and fewer investors are buying established homes.
"And while the reforms are intended to drive investors towards new supply, our colleagues in the building industry say they are not seeing an increase in investor activity. Even if they were, the current brick shortage will delay the delivery of new rental homes.
"Compounding the changes to negative gearing and the capital gains tax discount have been the four interest rate rises this year and the prospect of more to come. This is another deterrent for investors.
"And while some may claim that, as Perth's median house and unit rent prices have remained stable for several months, the market is easing, it is not. It is still difficult to find a property to rent, rent prices are at record highs, and affordability is at record lows."
Mr Mandanici said conditions such as these generally led to calls for greater regulation of the market such as rent caps or rent freezes.
"We all want renting to become more affordable but more regulation isn't the answer. To improve affordability, we need to give tenants more choice, which means we need more supply. That requires a legislative environment that supports and encourages investment in rental properties," he said.
"In addition to the Federal Government's actions, WA investors are facing more changes to the Residential Tenancies Act. These reforms will make it more difficult to select the most suitable tenant for a rental property and harder to end challenging tenancies. These changes risk discouraging investors further.
"Perth's rental market remains severely constrained. Before WA's decision makers impose further reforms, they need to wait and see what the full effects of the Federal Government's changes to taxation policy will be on the market.
"They should also take the time to see what the recent changes in the sales market could mean for property investment. Declining prices may see rental yields improve and tempt investors to return to the market. Or they may not."
