Rental vacancies fall – Louis Christopher

Data released by SQM Research has revealed that the national residential vacancy rate slipped in March, with the number of vacancies Australia-wide falling to almost 69,000.   So what is the impact of this? SQM’s Louis Christopher gives us the good oil.
Kevin:  Data released by SQM Research this week has revealed that the national residential vacancy rate slipped to 2.1% in March, with the number of vacancies Australia-wide falling to 68,000, almost 69,000, down from 2.2% in February.
What’s the impact of this? What does it mean to the market? Joining me to talk about this, Louis Christopher from SQM Research.
Louis, thanks for your time. Good to be talking to you again.
Louis:  Good to be here, Kevin.
Kevin:  Louis, what does this mean for the Australian property market?
Louis:  I think from month to month, it’s not a significant change. We like to look at how things change over a period of time. It’s still, of course, very interesting to see how things have changed on the previous month.
It’s a slight decline from 2.2% to 2.1%. I note that vacancy rates this time last year were at 2.3%, and so there has been a gradual downtrend in vacancies across the country – probably enough. The decline in vacancies has been driven by falls in Perth, where last year the vacancy rate was 5%; it’s now 4.1%, Brisbane, where this time last year, the vacancy rate was 3.5%; it’s now 3.2%, a sign that perhaps vacancies have peaked in Brisbane, Canberra, where vacancies are really tight now; last year they were at 0.8%; now this year we have them about 0.6%, with some offsets in Sydney.
We’re recording a vacancy rate in Sydney of 2.3% now, which was unchanged on the month, but compared to this time last year, basically March 2017, the vacancy rate was 1.7%, so vacancies in Sydney have basically been rising over the course of the year.
Kevin:  It certainly highlights for me anyway just how patchy the Australian market is. If you’re looking at those variance in rates. Pulling some numbers on this, vacancies in Sydney, according to your report, almost 16,000, and that represents 2.3%.
Louis:  That is correct. Yes, 16,000 sounds like a lot of vacancies but let’s remember that Sydney is a city of 5 million people, so it’s still relatively tight, and I would argue it’s just in the landlord’s favor. However, I do not believe in Sydney that landlords have a lot more power to lift the rents further than where we are now, and it’s slowly edging towards being a tenant’s market.
That’s been brought upon by an increase in rental properties predominantly in Sydney’s outer ring, and in particular in the west and northwest, where a lot of investment properties, a lot of land has been opened up, turned into estates, and that’s increased the supply of rental properties.
Sydney is less of an issue of a big oversupply of CBD apartments like Brisbane still has; it’s more of more vacancies in the burbs.
Kevin:  Yes. It shows you how robust that Melbourne market is, too – very stable with its vacancy rate continuing to sit at 1.4%, so it’s a good market in Melbourne.
Can we have a look just briefly before we go at the asking rents, what impact that’s having there, Louis?
Louis:  Yes, certainly. Overall, when we look at the capital city average for rents for houses, rents over the past 12 months have risen by 1.3%, and for units, a rise of 0.9%. So, overall, quite steady. For the month, rents did record a little bit of a rise of 0.5% and unit 0.2%.
When I look at the city breakdown, the areas recording the strongest rents is clearly Hobart. For the year, rents are up by 14% for houses and 18% for units. Mind you, there was a bit of a correction in the month for Hobart. We’ve been mentioning in the past, Kevin, how tight the Hobart market is. We have the vacancy rate at just 0.5%. It’s heavily favoring landlords right now.
Kevin:  Yes, I was at a conference this morning and they were talking about the Hobart market or the Tasmanian market overall. Interesting to note, too, in your figures, and I hope I’m reading this correctly, that the asking rents rose the most in Darwin over the month, up 3.3%.
Louis:  Over the month for houses, yes, that’s right. There seems to be a little bit of a turnaround in the Darwin market. There’s already been a bit of a turnaround in the Perth market, not that we recorded any stunning increases in rents in Perth last month. Just keep in mind Darwin has been quite volatile. We still have fairly elevated vacancies, so I wouldn’t be surprised if we record sometime in the near future a decline in rents for a month.
But yes, it’s better than what we’ve been recording. At one stage, we were recording rental declines in the order of 8% for the year for Darwin, and we’re no longer getting those type of numbers, so there is evidence that the Darwin rental market is finally bottoming out.
Kevin:  It’s good talking to you. Louis Christopher from SQM Research. Great insight as to what’s happening in the market, particularly for investors.
Louis, thank you so much for your time.
Louis:  Good to be here, Kevin.

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