Vacancy Rates Reflect Shift From Cities to Regions

Major improvements have been made on national vacancy rates, with levels tightened to below or close to pre-Covid-19 rates across most capital cities in Australia.

The residential vacancy rate dropped from 2.2 per cent to 2 per cent compared to August 2019 and 2.1 per cent in July, according to the latest report by SQM Research.

Perth, Brisbane and Darwin made the biggest improvements compared to last year, while Sydney and Hobart were slightly worse-off.

Melbourne was the outlier, which again recorded an increase from 3.1 per cent in July to 3.4 per cent, this was up from a 2 per cent vacancy rate in 2019.

Residential vacancy rate

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The SQM Research also shows most regional locations have recorded falls in vacancy rates, with Sydney’s Blue Mountains and Melbourne’s Mornington Peninsula dropping to 0.7 per cent, while just outside Brisbane, in Ipswich, rates fell to 0.9 per cent.

Asking rents levels painted a different picture: despite being up nationally for houses at 4.5 per cent and units 1.4 per cent compared to 2019, across capital cities houses rent prices were down 2.8 per cent for houses and down 5.5 per cent for units.

The worst-affected cities were Sydney, down 8 per cent on last year, Melbourne down 1 per cent for houses and 6 per cent for units, and Brisbane was marginally down 0.4 per cent for houses and 0.2 per cent for units.

Rents were up for both houses and units in Adelaide, Perth, Canberra, and houses only in Darwin compared to last year.

SQM Research managing director Louis Christopher said population shifts were a driving force in this data.

“The shift towards regional living continues at pace, largely at the expense of higher inner-city rental vacancy rates, I suspect there will have to be a high point in this move soon.

“However, I also suspect there will be a degree of permanency with the massive population shift,” Christopher said.

“Meanwhile, Sydney and Melbourne rents continue to fall providing leasing opportunities for tenants who have chosen to stay in town.”

Related: Will Stalled Migration Stem Housing Demand?

International arrivals impact Sydney, Melbourne

Immigration has also had an impact on vacancy rates with the low levels of arrivals and returning residents recorded in the Australian Bureau of Statistics August data.

Arrivals dropped in August down 15.5 per cent on July and down 99.1 per cent on 2019.

According to ABS visa group data there were 2,670 people arriving on permanent visas and 2,880 on temporary visas last month compared to 119,990 permanent visas and 680,190 temporary visitors in August last year.

Charter Keck Cramer national director of research and strategy Rob Burgess said overseas migration has fallen off a cliff, impacting the residential market.

“In the last nine or 10 years of course NSW and Victoria—Sydney and Melbourne—have been the main beneficiaries of overseas migration,” Burgess said at The Urban Developer’s The Housing Demand Dilemma webinar.

“This translates directly into the demand for residential dwellings moving forward, and will fundamentally impact the demand and supply equation for the national residential market.

“It’s almost a halving of dwelling demand otherwise required in Sydney and Melbourne [in the next five years].

“Interestingly, Brisbane is far less impacted and clearly that’s a reflection of the fact that the housing market is much less reliant and dependent on overseas migration, including international students.”