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Competition cools despite record low vacancy rates

Vacancy rates have returned to record low levels, but there is hope for renters, with new data showing competition for properties is starting to ease.

Domain’s Vacancy Rates Report for January 2024, found that after seeing a slight rise in December to 1 per cent, the national vacancy rate has again dropped a record low 0.8 per cent.

Vacancy rates in Sydney are back at a record low 0.9 per cent, while Melbourne (0.9 per cent), Adelaide (0.3 per cent) and Perth (0.4 per cent) are close to an all-time low.

Domain’s Chief of Research and Economics, Dr Nicola Powell, said it was expected that the rental market would tighten in January as the increased demand absorbed December’s supply boost.

“The glimmer of hope for renters this year does remain as we are likely moving into a period of slower rental growth and the number of prospective tenants per rental listing is easing,” Ms Powell said.

“This suggests that rental demand is pulling back and while it hasn’t been enough to boost the vacancy rate, it could be on the horizon.”

Sydney’s vacancy rate returned to a record low 0.9 per cent in January, driven by rental supply being at its lowest-ever January level. 

“Average views per rental listing have surged over the month, the highest of the capitals, showing increasing demand amidst the changeover period,” Dr Powell said.

“However, views per rental listing are lower annually — trending downward since mid-2023 — suggesting rental demand is beginning to slow.”

She said Melbourne’s vacancy rate is only 0.1 percentage points off its record low and this is the first monthly decrease since September with supply being absorbed in the changeover period.

“It was also supported by a monthly increase in average views per rental listing,” Dr Powell said.

“Despite the monthly rise, views per rental listing have dropped annually — a consistent trend since mid-2023 — suggesting rental demand is beginning to slow.”

Brisbane saw its first monthly decline since September, with the vacancy rate now sitting at 0.8 per cent.

Dr Powell said this was influenced by a drop in vacant rentals and a rise in average views per rental listing.

Perth was the only city with a steady vacancy rate of 0.4 per cent, however, it remains stubbornly tight, needing to see a significant boost to rental stock before conditions improve for tenants, according to Dr Powell.

Adelaide is the most competitive city for potential tenants, with the vacancy rate falling to 0.3 per cent and 0.1 percentage points off its record low, with no relief in sight until supply increases.

Darwin’s vacancy rate declined to 1.4 per cent, the second highest of the capitals, supported by a drop in rental stock and an increase in average views per rental listing. 

Hobart’s vacancy rate fell to 0.7 per cent, the lowest vacancy rate since February 2023 and a remarkable shift away from its record high seen in June 2023. 

Canberra’s vacancy rate decreased to 1.5 per cent, the largest monthly change of the capitals, however, conditions remain less competitive for tenants relative to other capitals. 

In each capital city, the areas with the highest vacancy rates were Dural – Wisemans Ferry (2.7 per cent) in Sydney, Macedon Ranges (2.4 per cent) in Melbourne, Kenmore – Brookfield – Moggill (1.8 per cent) in Brisbane, Mandurah (0.7 per cent) in Perth and Adelaide City (0.8 per cent) in Adelaide.

Dr Powell said they are expecting to see renters transitioning to homeownership, with the new first-home buyer incentives in place, along with a potential interest cut that will improve borrowing capacity and mortgage affordability.

“We anticipate a tipping point to be reached at some stage this year, making a return to a more balanced rental market,” she said.

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.