Rental vacancies not spurring first home buyers

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The highest rental vacancy rates in nearly 20 years may suggest more renters are buying their own home – but according to a property specialist it is not that simple.

Figures released by SQM Research show the number of residential vacancies nationally increased during April, jumping 0.3 percentage points to record a 2.3% vacancy rate with 66,120 empty rentals across the country.

This is the highest vacancy rate result for April that SQM has ever recorded since the index began in 2005.

SQM also showed the nation’s asking rents have remained relatively flat, with the capital city average recording a meagre 1.7% increase in asking rents for units and a 1.5% decrease in asking rents for houses over the past 12 months to May.

All capital cities recorded vacancy rates of 1.5% and above, but SQM managing director Louis Christopher argues each city has got its own story to tell.

“Nationally the figures were bumped up by Perth and Canberra – Perth has had a cyclical increase in vacancy rates because of the mining downturn and Canberra has been experiencing significant downturns because of federal government cuts which started with the Rudd government, prompting a rise in vacancy rates.”

The “jury is still out” on whether vacancy rates are going to continue to increase in Melbourne and Sydney, with the latter expecting a rise as new housing stock is completed, Christopher said.

But does this high vacancy rate point to more people buying their own home?

Not necessarily, Christopher said.

“While there has been some recovery of the housing market, this recovery has been marked by the lack of first home buyers. It’s been investor driven.”

Data from Roy Morgan Research shows over the last four years the number of investment property loans in Australia has grown by 37% compared to an increase of only 4% in the number of owner occupied loans.

However, Christopher said with the national recovery in building approvals and completions, the rental market is increasingly going to favour tenants over the next 12 months and rental yields for potential property investors will look even less attractive from their current low levels.

With the national recovery in building approvals and completions, the rental market is increasingly going to favour tenants over the next 12 months. Rental yields for potential property investors will look even less attractive from their current low levels, he said.

Vacancies are rising due to increased supply and lower tenant demand and so landlords will be finding it difficult to raise rents, explaining the lack of significant rental price increases.  

But the low rental yield should not put potential property investors off, Christopher said.

“It’s hard to look at the property market with such a black and white view. It comes down to the individual’s financial circumstances, even if rental yields are down. With property you definitely have to take the long-term view.”

No capital cities recorded monthly declines in vacancies, however Adelaide and Hobart both only increased by 0.1 percentage points during April.

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