July 16, 2024

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The Intersection of Information and Insight

Vacancy rate at an all-time low for the third month

4 min read

Key takeaways

Australia’s vacancy rate holds at a record low for the third month in a row, at 0.8%.

Nationally, the rental market remains competitive for tenants, however, marginal improvements continue to be observed in some capital cities.

Vacancy rates in Perth remain at a record low, while Sydney and Adelaide are close to an all-time low.

Conditions vary across the capitals, with vacancy rates decreasing in Hobart (0.8%) and Canberra (1.4%) but increasing in Sydney (1.0%), Melbourne (1.0%), Brisbane (0.9%) and Darwin (1.5%).

In Adelaide (0.3%), Perth (0.3%) across the combined capitals (0.8%) and combined regionals (0.8%), vacancy rates remained steady in November, indicating stabilising conditions for tenants.

In Brisbane, Hobart, Canberra, Darwin and across the combined regionals, vacancy rates are higher annually, while Perth and Adelaide remain steady.

The latest Domain Vacancy Rate Report for November 2023 shows that for the third consecutive month, Australia’s vacancy rate remains at 0.8% – a record low.

A chronic undersupply of rental stock coupled with strong overseas migration and rising property prices against increasing demand are driving the competitive nature of the rental market.

However, there are signs of stabilising conditions in some markets.

Our rental markets are said to be in “equilibrium” when the vacancy rate is around 2%, meaning this shortage of properties for rent pushes up rental values.

Interestingly, nationally, the average views per rental listing declined in November, indicating a slight easing of demand relative to total supply, but that’s not unusual at this time of year.

Dr Nicola Powell, Domain’s Chief of Research and Economics said

However, a significant boost to rental stock is still required before we see a more balanced market (a vacancy rate of 2-3%).

Increased investor activity and more development are needed to drive a surge in rental stock.

Table 1. Monthly vacancy rates.

 

Canberra

 

1.4%

 

1.6%

 

1.2%

 

 

 

Darwin

 

1.5%

 

1.2%

 

0.9%

 

 

However, as the rental market changeover period begins, it is forecast to be the most competitive on record given the historically low rental stock.

Dr Nicola Powell commented:

“While the rental market continues to be a landlord’s market, we are seeing signs of stabilising conditions in some markets – Sydney, Melbourne and Brisbane experiencing a slight increase in vacancy rates.

In the upcoming months, while we do expect to see a seasonal lift in vacancy rate as rental supply traditionally increases, it will be met with higher demands as the changeover period kicks off.

It has certainly been a tough year for renters. In 2024, we do anticipate the rental market to reach a tipping point driven by stretched affordability.

More renters opting for house shares and first-home buyer incentives will help transition some to being owners or fast-track others to a more affordable purchase.”

Looking at the capital cities movement:

  • Sydney’s vacancy rate has increased, from the previous month’s record low to 0%. This is the first monthly rise since June, driven by a surge in rental supply. Average views per rental listing have declined over the month, highlighting potential relief. However, there needs to be a seismic shift in supply to see significant improvements for tenants.
  • Melbourne’s vacancy rate rose to 0%. This is the first monthly increase since June, driven by a boost to rental stock. It was also supported by a fall in average views per rental listing, showing a marginal fall in demand.
  • Brisbane has seen its second successive monthly rise in vacancy rates, sitting at 9%. This is an 11-month high, indicating its rental market is stabilising and moving away from the highly competitive conditions and record low vacancy rate last seen in February.
  • Perth’s vacancy rate is steady for the fourth month in a row, at 3%, a record low. It is one of two of the most competitive cities for potential tenants. Vacancy rates remain stubbornly tight, emphasising the need for increasing rental stock.
  • Adelaide remains the other most competitive city for potential It is steady for the fourth consecutive month, at 0.3% and 0.1 percentage points off its record low. A significant boost in supply is needed to see a movement away from these tight conditions.
  • Darwin’s vacancy rate has jumped to 5%, the largest monthly change in the capital cities. This is the highest vacancy rate since July 2020 and it is the highest of the capitals, rising above Canberra this month. This is supported by a drop in average views per rental listing, at its lowest point since the onset of the COVID-19 pandemic.
  • Hobart’s vacancy rate dropped for the fifth successive month, to 9%. This is the lowest vacancy rate since March 2023. It is now the third-lowest of the capitals, a remarkable shift away from its status as the second-highest vacancy rate in September.
  • Canberra’s vacancy rate has fallen to 4% and is now the second highest of the capital cities. This is the lowest it has been in a year, however, conditions remain less competitive for tenants relative to other capitals.

About Leanne Jopson
Leanne is National Director of Property Management at Metropole and a Property Professional in every sense of the word. With 20 years’ experience in real estate, Leanne brings a wealth of knowledge and experience to maximise returns and minimise stress for their clients.

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