Rental markets tighten but CBDs vacancies remain elevated

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THE national residential vacancy rate fell to just 1.5% during November, with five out of the eight capital cities retaining a sub-1% reading and translating fast-rising rents.

Data from SQM Research shows Melbourne and Sydney are home to the highest vacancy rates, of 3.2% and 2.6% respectively, having been hit hardest by the pandemic and the halting of migration. Their CBD vacancies fell but remain elevated at 7.2% and 6.9%.

Brisbane was the other city to record over 1% vacancies, like Melbourne firming over the month to 1.3%. Hobart tightened to a tight 0.3%, as did Adelaide to 0.5%, while Perth (0.6%) and Canberra (0.8%) were steady, and Darwin lifted to 0.9%.

“As we come to the end of 2021, the no vacancy sign is lit up across most of Australia,” Louis Christopher, managing director of SQM Research said.

He said five of our eight capital cities simultaneously recording rental vacancy rates under 1% has translated into surging rental rises, particularly for houses where the capital city rise for the year is now recorded up by 11.7%.

“It is clear that demand has boomed for larger properties since COVID and we are not yet recording a reversal of this trend. However, I do believe 2022 will see a move towards units, simply by virtue of their relative affordability plus the new inflow of immigrants will look for unit accommodation first and foremost as they have done in the past.”

Affordability constraints has already flowed through to house searches this year, with “duplex”, “dual” and “unit” among the most-increased search terms compared to 2019, according to Domain.

Many regional townships in NSW recorded a tightening in vacancy rates over November, such as Dubbo and the NSW North Coast which recorded 0.4% and 0.5% respectively, while the Gold Coast recorded another fall in vacancy rates to just 0.7%, according to SQM Research.

Holiday townships vacancy rates are likely to fall further over the December and January holiday period.

Perth house rents jumped by 5.0% in November, while unit rents fell 1.3%. Conversely, Hobart saw a 0.8% drop in house rents and a 7.7% increase for units.

Most cities saw modest gains across both markets though the month. Sydney was up 3.1% for houses and 0.9% for units.

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