Rents Follow Vacancy Rate Trends

Posted on 18/05/2017  
Rents Follow Vacancy Rate Trends

Rental growth in capital city markets is closely following trends with vacancy rates.

The cities recording the biggest growth in residential rentals are those where vacancy rates overall are low and falling. Those with high or rising vacancy rates are seeing rents declining overall.

New data on vacancy rates and asking rents from SQM Research shows that cities with the lowest vacancies – and trending lower – are Canberra and Hobart.

These are also the cities with the strongest performance on rental growth.

According to SQM, Hobart’s vacancy rate a year ago was 0.9% and since then it has fallen further to 0.6%. In the past 12 months, Canberra’s vacancy rate has dropped from 1.4% to 1.0%.

SQM says Canberra rents are up 9.3% for houses and 6% for units in annual terms. In Hobart, rents are up 10.5% for units and 3% for houses.

Melbourne also has vacancies trending in the right direction – down from 2% to 1.6% in the past year – and rents on average have risen 6.4% for houses and 4.7% for units.

The cities with negative vacancy trends – Perth, Darwin and Brisbane – have all recorded decreases in asking rents, according to the SQM figures.

In Perth, rents are down 7.5% for houses and 9.4% for units, on the back the highest vacancy rate in capital city Australia – up from 4.5% a year ago to 4.9% now.

In Darwin, rents are down 6.9% for houses and 5.5% for units, while in Brisbane – where oversupply in the inner-city suburbs has caused the overall city vacancy rate to rise from 2.8% to 3.3% - rents have fallen, though only marginally at this stage.

Typical house rents in capital city Australia range from $360 per week in Hobart to $740 per week in Sydney, while for the apartment market they range from $290 per week in Adelaide to $520 in Sydney.

While Sydney has the highest rents among the capital cities, rental rates have not risen much in the past 12 months, unlike the situation with sale prices. According to SQM, Sydney rents are up just 2.9% for houses and 3.2% for units.

This is despite a low vacancy rate, at 1.8%.

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