The number of available residential properties available for in Australia have fallen for the second month in a row, with the vacancy rate now sitting at 1.7 per cent, according to the latest research from Domain.
Domain’s rental vacancy rates report for May shows the number of available rentals either fell or held stable over the past month across all of the major capital cities.
The majority of cities recorded a tightening vacancy rate, with available property levels in Sydney, Melbourne, Brisbane, Hobart and Darwin all falling over the course of the month.
“Capital city-wide, vacancy rates in cities are either declining or they held stable, and the ones that did hold stable – Perth, Adelaide and Canberra – have very low vacancy rates anyway,” Domain’s Senior Research Analyst Dr Nicola Powell told Elite Agent.
“All of our small cities have tight rental markets, it’s only really Sydney and Melbourne that have a higher vacancy rate.”
The last time national vacancy rates were this low was in February 2020, the month before the COVID pandemic caused widespread lockdowns.
It is also the equal-lowest national vacancy rate since Domain records began in 2017.
RENTAL PRICES ON THE RISE
Dr Powell said the tightening market suggested prices would start to rise for renters.
“I think what it ultimately says for tenants is to expect some rental price increases,” she said. “Because we’ve got declining vacancy rates, we’ve got very tight vacancy rates in many of our cities.
“The only ones where tenants still have a bit of power to negotiate are Sydney and Melbourne but even with that being said, Sydney and Melbourne rental markets are not uniform across the city.”
Despite still having the highest capital-city vacancy rate, Melbourne’s available rentals tightened more than any other capital for the second month in a row, declining from 4.2 per cent to 3.8 per cent.
There were just under 22,000 estimated vacant rental listings at the end of May, a decline of 10 per cent on the previous month.
In Sydney, the vacancy rate has returned to pre-pandemic levels, falling from 2.9 per cent to 2.7 per cent. This is the same as for March 2020, one month before the pandemic induced a bounce in the vacancy rate to 4 per cent.
“I think the pain in Melbourne has been much longer in terms of the impact on the rental market,” Dr Powell said.
“Obviously international border closures have had a large impact on rental markets, because overseas migrants and international students tend to rent upon arrival.
“That’s had a larger impact on Sydney and Melbourne, as those cities that have greater exposure to overseas migration.
“The areas that have the highest level of vacancy rates are also situated around those university locations and inner-city areas.”
INNER-CITY MELBOURNE ASKING RENTS DOWN
Dr Powell said asking prices for rents in Melbourne CBD had dropped by as much as $100 a week, which may lead to some interesting trends.
“In Melbourne, the point of rental weaknesses is in the inner city, we’ve got the highest vacancy rate in the CBD,” she said.
“We could be seeing investors sell off, because we are seeing the number of vacant properties decline.
“Or we could be seeing tenants actually choose to move to some of these areas that favour them more in terms of having greater power to negotiate.
“If we look in Melbourne City, for example, unit rents are back to 2010 asking rents.”
Vacancy rates in Brisbane dropped 0.1 per cent to 1.3 per cent and Hobart fell 0.1 per cent to 0.4 per cent.
Vacancy rates Perth (0.8 per cent) Canberra (0.8 per cent) and Adelaide (0.6 per cent) all remained steady.
Darwin, Adelaide and Brisbane are at their lowest vacancy rates since Domain records began in 2017. Canberra and Perth are close to record multi-year lows.