Melbourne rental markets tightens
A short but possibly very important article!
SQM Research reported today that Melbourne's vacancy rate had declined to just 1.7 per cent.
That's nearing a 10-year low.
Given the very high rate of construction seen in Victoria, this is remarkable, and potentially leaves many commentators - including me, actually - with egg all over their faces.
The state of Victoria has added more than 229,000 dwellings to its stock or more than 10 per cent over the past 5 years.
Yet with Melbourne population growth rising to a record high, even this mightily impressive rate of dwelling construction still not been enough to stop vacancy rates falling from around 2.5 per cent to well below 2 per cent.
Asking rents are rising solidly for houses and apartments in Melbourne and Sydney, and have hit new highs in both cities.
Despite this, rental CPI is tracking at around two decade lows, with rents having declined in Perth, Darwin, and now for Brisbane apartments.
Heck, even the reported vacancy rate in Melbourne's Docklands tumbled to just 2.4 per cent according to SQM Research, after a sizeable seasonal spike through the Christmas break.
The monthly vacancy rate figures can move around a bit, and vacancies can be higher over the Christmas period, but just to get a feel for where things are heading I also run a 4mMA chart.
Some cities did record seasonal spikes over Christmas, but the tightness in Hobart and Canberra is clearly apparent.
Perth's rental market seems to have improved just a notch lately.
The March result showed vacancy rates below 2 per cent in Sydney and Melbourne, while Canberra and especially Hobart have very tight rental markets.
This is potentially hugely significant, for it suggests that apartment oversupply will not be the trigger for the next downturn in Sydney and Melbourne, which is a conclusion I've previously drawn in my own market research reports (Brisbane's inner city apartment market is a different story).
One thing we can say, however, is that the true extent of any oversupply doesn't become apparent until sentiment and prices are in decline.
Nevertheless, all eyes turn to APRA, and to the cash rate yield curve.