CBDs, Holiday Spots Still Reeling As Rental Vacancies Dip

The nation’s largest rental markets in Sydney and Melbourne continue to reel from the impact of Covid-19, despite a minor decrease in the national residential rental vacancy rate.

SQM research shows the national residential rental vacancy rate recorded a minor decrease from 2.6 per cent in April to 2.5 per cent in May, with the total number of vacancies Australia-wide now at 86,398 residential properties.

Sydney rose to 4.0 per cent—the highest vacancy rate in the country—while Melbourne’s vacancy rate had the highest percentage increase of 0.3 per cent, recording a 3.1 per cent vacancy rate.

Adelaide and Hobart both have the lowest vacancy rate, at 1.2 per cent each.

The year-on-year comparison reveals “unseasonal” rises, with the national rental vacancy rate in May 2019 at 2.2 per cent compared to 2.5 per cent in May 2020.

Only Perth and Darwin recorded lower vacancy rates compared to this time last year.

Among capital city CBD locations, Sydney CBD continues to blow out, now 16.2 per cent in May, up from 13.8 per cent in April. Melbourne and Brisbane CBD are also up, now recording 9.3 per cent and 13.3 per cent vacancy rates in May respectively.

Melbourne’s Southbank has risen to 16.8 per cent, and Sydney’s Palm Beach is now 16.7 per cent, continuing a trend in which holiday spots and CBDs have borne the brunt of a coronavirus-related blow-out in rental vacancy rates.

Capital City CBD vacancy rates

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With 98,061 listings recorded on 9 June, compared to 105,277 listings recorded in the month prior, SQM’s Louis Christopher says total rental listings appear to have peaked for now, and predicts a drop in vacancy rates for June 2020 on the back of data from 9 June last year showing 95,085 rental listings.

During May, capital city asking rents increased 0.2 per cent for houses but declined 0.7 per cent for units, with asking rents of $538 a week for houses and $425 a week for units.

Asking rents for both houses and units continued to decline in Sydney and Melbourne throughout the month—but Brisbane, Perth and Darwin bucked the trend, recording increases in house and unit asking rents.

While unit asking rents remained stable in Canberra, a 1.0 per cent decline in house asking rents was recorded.

Adelaide and Hobart both recorded decreases in unit asking rents of 0.2 per cent and 4.6 per cent respectively, but house rents increased by 0.9 per cent and 0.6 per cent respectively.

SQM managing director Louis Christopher noted a weekly rental listings indicated a slight decline in supply for the first half of June.

“I think what is happening here is Airbnb property owners have now pulled back from listing long-term and are now waiting this time out in the hope that the borders will be open shortly.

With an expected 170,000 dwelling completions for this year and still no imminent opening of the international border, Christopher believes rental vacancy rates are likely to remain elevated for the remainder of the year.

“While First Home Buyer grants may assist in soaking up some of the new supply, let’s just remember the bulk of underlying demand growth in recent years has come from net migration,” Christopher said, adding it should also be noted that many first home buyers are tenants.

Predictions for post-pandemic rental vacancy rates come amid the release of new Australian Bureau of Statistics data showing residential property prices increased 1.6 per cent in the March quarter, led by Sydney and Melbourne, with all capital cities recording a rise in prices.