CORONAVIRUS COVID-19 PANDEMICRESIDENTIAL PROPERTY

Rising vacancies put pressure on rents

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MELBOURNE now has the highest rate of residential vacancies in the country, leapfrogging Sydney in September as it remained under harsh lockdown as the rate of empty CBD dwellings hit a record high.

New data from SQM Research showed the national residential rental vacancy rate remained stable at 2.0% throughout the month, just below the 2.1% 12 months ago. There are 70,389 vacant residential properties nationwide.

Melbourne CBD vacancies increased to 10.8%, up from 10.0% in August. Brisbane CBD’s vacancy rate lifted to 12.5%, from 11.4%, while Sydney CBD was at 12.8%, albeit with a tiny drop from August.

Most capital cities recorded declines in vacancy rates over September, except for Melbourne which again recorded an increase – from 3.4% to 3.8% – as it remained under a harsh round of lockdowns and 2,316 vacant properties flooded the market.

Sydney, previously home to the highest vacancy rate, was stable at 3.5%.

Darwin continued its journey from among the highest vacancies of the capitals to the lowest. It posted the biggest decline in September, of 0.4%, down to 0.7%, and has come down from 2.9% over 12 months.

Only Hobart, which firmed slightly to 0.6%, has a lower rate.

Canberra’s vacancy rate inched upwards but is still at a low 0.9%, as is Perth after tightening slightly. Brisbane and Adelaide also saw modest declines, to 2.0% and 0.8% respectively.

Louis Christopher, managing director of SQM Research, said elevated rental vacancy rates in Sydney and Melbourne continue to push city rents downwards, particularly in the CBD and inner ring suburbs close to the CBDs.

“However, outside Sydney and Melbourne vacancy rates are falling again. And then when we consider regional locations vacancy rates have fallen below 1% which really represents the point of little to no rental vacancy.

“In short, in September the population was still looking to stay away from the large cities. We think this trend may soon reverse, but to what extent remains a mystery.”

City Sep-2019 Vacancies Sep-2019
Vacancy Rate
Aug-2020
Vacancies
Aug-2020
Vacancy Rate
Sept-2020
Vacancies
Sept-2020
Vacancy Rate
Sydney 22,762 3.2% 25,828 3.5% 26,012 3.5%
Melbourne 11,599 2.0% 20,891 3.4% 23,207 3.8%
Brisbane 7,880 2.3% 7,154 2.1% 7,057 2.0%
Perth 5,588 2.7% 2,294 1.1% 1,978 0.9%
Adelaide 1,644 0.9% 1,699 0.9% 1,572 0.8%
Canberra 668 1.0% 569 0.8% 604 0.9%
Darwin 916 2.9% 349 1.1% 217 0.7%
Hobart 174 0.6% 205 0.7% 182 0.6%
National 71,404 2.1% 69,971 2.0% 70,389 2.0%

The Reserve Bank of Australia last week warned extended international travel restrictions would hit push up short term vacancy levels further in the absence of international students.

“Extended periods of vacancies could lead to mortgaged investors struggling to afford repayments, and deciding to sell their properties,” the RBA said in its Financial Stability Review.

“This has the potential to exacerbate housing price falls, particularly in areas with more investor properties.”

According to SQM Research, Sydney posted the largest declines in rents for both houses, at 1.7%, and for units, at 1.2%, while rents in Melbourne dropped by 0.8% for both houses and units over the month.

Perth, Darwin and Hobart all posted increased in both houses and units, led by Hobart with highest rental growth in the country for both houses and units, at 3.2% and 3.4% respectively.

Rents in Darwin increased by 1.9% for houses and 1.8% for units, while Perth saw a 0.4% increase for units and 1.4% for units.

House rents in Adelaide lifted 1.2%, while unit rents slipped 0.3%, while Brisbane saw a 0.7% increase in house rents and unit rents were stable.

Canberra recorded a 1.3% decline in house rents but a 1.5% increase in unit rents.

Sydney rents are now 8.9% lower over 12 months for both houses and units, while Melbourne’s rents have dropped 2.2% and 5.1% respectively.

Perth landlords enjoyed the highest annual rent increases in the country in both markets, up 6.8% for houses and 7.6% for units.

Adelaide (5.1%) and Hobart (4.4%) have seen strong growth in house rents year on year, although Hobart’s unit rents have dropped 5.2% in that time.

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