Rental conditions remain tight, with further strain expected as borders reopen, according to Domain’s latest Rental Vacancy Report.
Domain Chief of Research and Economics, Dr Nicola Powell said while we saw a slight increase in the number of available rental properties in December, we were very much operating in a landlords’ market.
“Early in 2022, it’s likely we’ll see decreases in the number of vacant rental properties as strong historical rental demand in January reduces the number of vacant rental listings,” Dr Powell said.
“Rental markets will be under further strain as borders reopen and the flow of international students, overseas migrants and expats resume.
“Sydney and Melbourne are likely to be under greater pressure as historically they have welcomed more overseas migrants than other cities.”
Nationally, the vacancy rate rose marginally to 1.7 per cent in December 2021 – the first increase since December 2020 – but still remained low compared to previous years, and 0.7 percentage points lower than the same time last year, the report revealed.
“The rise in vacancy rates was driven by significant monthly increases in the number of vacant rentals across all capital cities except Hobart,” the report said.
“It is typical for the rental market to see a boost in supply in December as the end of year marks the rental changeover period, with the end of leases and increased choice overall.
“As the country adjusts to life post lockdowns, the national vacancy rate should continue to see a decline in the new year as strong historical rental demand in January reduces the number of vacant rental listings.”
Vacancy rates have either increased or remained steady in December, according to the report.
Sydney, Melbourne, Brisbane, Perth, Canberra and Darwin all saw a rise this month. Meanwhile, Adelaide and Hobart saw vacancy rates held steady at multi-year lows.
“Most cities have a lower vacancy rate year-on-year except Darwin, which recorded an increase,” the report said.
“Although vacancy rates have risen this month, they still remain tight in all capitals, except Melbourne.”
The report showed an elevated number of listings nationally. This was consistent with the rental changeover period seen in the final month of the year which had resulted in a consistent impact on most capital cities, with rising rates across all cities except Adelaide and Hobart.
Sydney recorded its second month in a row of rising vacancy rates – up to 2.6 per cent in December.
“This is the highest level it’s been at since May 2021 but at the same level recorded in March 2020, just before the COVID pandemic caused a huge surge in the vacancy rate,” the report said.
“There were just over 15,000 estimated vacant rental listings at the end of December, a 13.8 per cent increase over the month.”
In Melbourne, the vacancy rate is up 0.2 percentage points to 3.2 per cent, ending the downward trend and four consecutive months of declining vacancy rates.
Rates are significantly lower year-on-year, down 2 percentage points from the peak seen in December 2020 following the extended lockdown.
However, rates still remained elevated – roughly twice as high as pre-Covid levels.
There were just over 16,000 estimated vacant rentals at the end of December.
Canberra saw another marginal increase in vacancy rates to 1 per cent over December, equalling the highest recorded rate in 2021 seen in August and September during lockdown.
There was a 20.1 per cent increase in the number of vacant rental listings, continuing to challenge the national capitals’ status as a landlords’ market.
Rental markets remain tight
While vacancy rates are higher across most capital cities, all rental markets were still operating in favour of landlords except Sydney and Melbourne, according to the report.
“As all states adjust to eased restrictions, the rental market could continue to become more competitive,” the report said.
Adelaide vacancy rates held steady at their lowest point since Domain records began and Hobart remained at a multi-year low.
“While there was an increase in vacancy rates in Brisbane, Perth and Darwin, they are still historically lower than previous years.”
Reduced rental stock
Although rental stock rose for all capitals except Hobart over the last month, coinciding with the December lease changeover period, the report showed rental stock was significantly lower across all capitals except Darwin compared to last year.
Nationally, rental stock shrunk from 54,000 dwellings in December 2020 to 37,000 in December 2021 representing a 31 per cent reduction in vacant rentals.
Melbourne saw a 35 per cent reduction in stock compared to last year, and Sydney fared slightly better with a 28 per cent reduction.
Capital city regions
Several regions across Sydney saw the largest rise in vacancy rates, with Hornsby recording the biggest monthly difference of 1 percentage point, up to 3.2 per cent.
Half of the regions with the largest monthly decline in vacancy rates were located in Queensland.
Brisbane Inner topped the list this time, overtaking Melbourne city’s two consecutive months of the largest decrease, with a decline from 4.2 per cent in November to 3.7 per cent in December.