Vacancies back to record lows
There's a lot of debate about whether interest rates should be cut this year, and if so by how much.
One of the seemingly overlooked issues with holding interest rates at contractionary levels, while simultaneously assessing borrowers with an artificially high buffer of 300 basis points - meaning a stress test using a mortgage rate of around 9½ per cent - is that it's acting as a handbrake on dwelling construction.
Higher interest rates make residential developments both less profitable and less attractive from a risk-adjusted perspective, while homebuyers are finding very hard to access the required finance to buy units in new projects.
While it might have seemed that the rental crisis went away over December, as international students return and the new year rolls on the national rental vacancy rate has dropped all the way back to record lows of around 1 per cent.
Source: SQM Research
Although there will always be some poor quality rentals available, and there will always be some frictional rental vacancies, available quality rentals are as close to zero as you're ever likely to see in Brisbane, Perth, and Adelaide, and they're also at all-time lows on Sydney's lower north shore,
Meanwhile Hobart's rental vacancy rate has dropped all the way back down to near-record lows for a capital city of just 0.3 per cent.
Source: SQM Research
It's likely that rental price inflation will be lower than it has been in 2025, after a huge surge in rents over the past couple of years, but that doesn't mean the rental crisis has been effectively tackled.
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