Lockdown not a predictor of low national vacancy rates

While national vacancy rates remained steadily low in August, capital cities have seen varying rates that are not always consistent with their lockdown status, according to Domain.

Domain Chief of Research and Economics, Dr Nicola Powell has revealed in last month’s Rental Vacancy Rates report the national vacancy rate remained at 1.6 per cent.

It’s a multi-year low that has been held for three consecutive months.

“There has been a mixed response in vacancy rates across the capitals, as lockdowns contribute to a rise in some while others held steady over the month,” Dr Powell wrote.

“[This is] particularly evident when comparing the change in Sydney and Melbourne vacancy rates.”

Melbourne, Brisbane, Canberra and Darwin saw increased vacancy rates while Sydney, Perth, Adelaide and Hobart remained stable.

Extended lockdowns seem to have had little impact on Sydney with vacancy rates holding at 2.6 per cent since June, demonstrating a high demand for rental properties. 

Dr Powell suggested increasing house prices and affordability issues in Sydney were be behind the low vacancy rates, with tenants renting instead of buying a house.

“Also, rapidly rising prices may have led to reduction in rental stock, as landlords chase capital growth on their investment properties,” she added.

However, it should be noted Sydney’s extended lockdowns may put upwards pressure on the vacancy rates, if more tenants struggle with reduced or lost income.

It is also possible landlords who previously marketed their investment properties as short-term holiday lets may change to longer-term rentals, which would also lift rental supply.

Capital city vacancy rates
Aug-21Jul-21Aug-20Monthly changeAnnual change
Source: Domain. The vacancy rate represents the portion of available, empty rental properties relative to the total stock of rental property. The rental vacancy rate is based on adjusted Domain rental listings and will be subject to slight revisions over time.

Data provided by domain

One of the most significant differences between Australia’s two most populated and locked down cities is, in Sydney tenants are currently protected by the state’s rental moratorium, whereas Melbourne’s ended in March.

In Melbourne, vacancy rates increased to 3.8 per cent, primarily due to multiple lockdowns and harsh restrictions.

“Melbourne entered its sixth lockdown over the month, shifting the trajectory of the rental market,” Dr Powell said.

“The supply of vacant rentals was previously shrinking, although this has firmly turned following a two-month streak of more vacant rentals.”

Dr Powell encouraged Melbourne-based tenants to use the increased vacancy rate as “bargaining power”.

“Tenants have more choice and more power to negotiate cheaper rents, as heightened rental supply in particular areas is likely to weigh down asking rents,” she said.

In other cities such as Brisbane, Hobart, Adelaide and Darwin where vacancy rates remain tight, tenants continue to operate in a landlord’s market with rates bordering on multi-year lows. Landlords may leverage this to increase rent in these cities.

Source: Domain

Despite the monthly changes, vacancy rates in every city are lower than they were in August 2020 (except for Canberra). It is also lower than the peak vacancy rate reached in each city throughout the pandemic.

Vacancy rates rose in Canberra and Darwin over the month to 1.1 per cent and 0.8 per cent respectively.

The largest monthly rise in vacancy rates was in North Canberra.

“Tenants will still be finding it highly competitive to secure a rental, but the lift in vacant rentals is a good sign that the extreme conditions may start to elevate for tenants marginally,” Dr Powell noted.

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