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Vacancy Rates Keep Falling

The situation for tenants across Australia keeps getting worse, because vacancy rates keep falling – and that means rents will keep rising.

The latest report from finds that the national vacancy rate in January was 0.8%, the lowest on record.

The other major source of data on vacancy rate, SQM Research, has a similar figure.

Two of our capital cities, Perth and Adelaide, have vacancy rates of just 0.3% – and there are now only two cities with vacancy rates above 1% – Darwin at 1.3% and Canberra at 1.5%.

Keep in mind that a vacancy rate below 3% is considered a shortage, under 2% is a serious shortage and under 1% is a national crisis.

When your vacancy rate is 0.3%, there’s virtually nothing available to rent and it’s common now to see queues at open houses stretching out the door and down the street.

In circumstances like this, rents inevitably must rise and the cost of living problems for ordinary Australians keep getting worse.

So, what we’ve seen in recent years is that vacancy rates keep getting smaller and it’s still happening.

And I am quite certain that this trend will continue – because rental demand keeps rising for a host of reasons and there is no solution in sight for the shortage of supply.

Demand is rising because international borders are open and overseas migrants are flocking back to Australia and international students have returned.

This factor became immeasurably bigger recently with the decision of the Chinese Government which forces students from China to return to Australia to study – thereby adding massively to incoming rental demand.

There are no solutions to the shortage of rental properties because politicians at all levels of government do not understand the problem or how we got into this situation, and therefore are unable to devise solutions.

My view very strongly is that politicians and bureaucrats have created the shortage through a series of decisions over the past five years which have discouraged property investment.

A third of Australian households rent and more than 90% of the homes they rent are provided by investors, who are overwhelmingly mum-and-dad households who own just one property.

But there has been so many disincentives to property investment – including the tendency by media and politicians to demonise investors are rich greedy landlords – that more and more Australians have opted out.

So, year by year, the vacancy rates have got smaller.

Catastrophic weather events have also had an adverse impact and the growing use of short-term rentals like air bnb by some investors has added to the problem.

But the biggest issue is simply that property investment has become increasingly unattractive through the actions of politicians, bureaucrats and journalists.

And the situation won’t change for the better until government stop punishing investors and start providing meaningful incentives for people to become owners of investment property.


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