Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Tuesday, 15 November 2016

Vacancy rates declined in October

Vacancy rates down in October

Vacancy rates declined nationally to 2.3 per cent in October according to SQM Research, led by falls in Sydney, Melbourne, Perth, Canberra, and Hobart.

Sydney (1.7 per cent) and Melbourne (1.9 per cent) have seen their rental markets tighten a little over the past year.

Nationally, rental markets have held fairly steady over the last 12 months. 

There was another uptick in Brisbane to 3 per cent, where there is also a high number of inner city apartments still under construction.

Canberra's vacancy rate declined to just 1 per cent resulting in a surge in asking rents for both houses and apartments.

However, there is a record number of units under construction in Canberra too, so this appears unlikely to last for too long.

In part thanks to ongoing population growth, SQM does not see systemic risk arising from oversupply:

"Vacancies are likely to rise in Melbourne, Brisbane and Sydney over 2017 as more new high-rise apartment developments come onto the market. 

However, we believe that oversupply will largely be limited to inner-city areas where apartment supply is rising the most, which will temper rental growth."

Chart crime!

The vacancy rates figures are not seasonally adjusted, but at the risk of indulging in some 'chart crime' I find that it sometimes helps to smooth the figures over the past four months to get a feel for the trend. 

Hobart's rental market looks to be remarkably tight which has resulted in both rents and prices popping higher. 

Adelaide looks to be the most balanced market.

Darwin's rental market looks to have stabilised somewhat, while Perth and Darwin may tentatively be converging towards a similar vacancy rate. 

Despite the construction boom, Sydney and Melbourne have not yet seen any meaningful increases on this index.

In fact, thunderous population growth in the Victorian capital has seen vacancy rates tumble from a recent seasonal peak of 3.2 per cent, although that figure was notched in the month of December 2014, traditionally a weak month for the rental market. 

Sydney remains the most expensive market by far in which to rent a house ($738/week) or an apartment ($510/week). 

In Melbourne, by comparison the median rental for a house is only $488/week. 

Median asking rents for apartments increased in both Melbourne (+4.6 per cent) and Sydney (+4.2 per cent) over the year to October.

Despite the tightening market, Hobart continues to have comfortably the lowest capital city rents in Australia at $356/week for houses and $297/week for units.