Falling vacancy rates in an area tend to indicate its growing appeal with renters, which means it’s easier to find tenants for a property – an attractive characteristic for any investor.

Going by this received wisdom, it seems that savvy investors could be well advised to look to the inner city suburbs of Sydney.

According to the February 2014 REINSW Vacancy Rate Survey, the number of properties for rent in Sydney’s inner suburbs recorded a drop of 0.3%, leaving them at 1.5%.

Across Sydney, overall vacancy rates fell 0.2% to 1.7%, with the middle suburbs dropping 0.3% to 2.0% and the outer suburbs down 0.1% to 1.6%.

These vacancy rate declines follow similar drops recorded by REINSW late last year.

REINSW president Malcolm Gunning said the falls were the most dramatic in the inner suburbs, where they hit two year lows.

The wider picture for Sydney highlights the need for investors to be encouraged to continue purchasing residential property, he said.

“There is not enough stock available and this combined with the future threat of interest rate increases will see rises in rental prices.”

First home buyers who can’t afford their dream homes are putting pressure on the rental market, he added.

The REINSW data also showed:


  • Wollongong is facing a severe lack of rental properties with vacancy rates down 0.2% to 1.8%.
  • Newcastle has seen a decline of 0.3% to 2.4%.
These figures sit in stark contrast to the most recent vacancy rate figures from SQM Research.

According to the SQM data, the national vacancy rate has lifted by 0.3% year-on-year.

Given the year is already showing significant signs of promise in the sales market, the increase in vacancy rates is to be expected, SQM's research director Louis Christopher said.

“Prospective buyers will be leaving the rental market to purchase their own properties, resulting in an elevation of vacancies.”

The SQM data also showed a strong and rapid increase in vacancy rates in a number of CBD areas – notably in Brisbane, Perth and Melbourne.

Christopher warned that anybody considering investing in the CBD’s of these three cities should be strongly aware of this fact.

Meanwhile, according to the SQM data, Sydney also recorded a 2.1% increase in asking rents for houses and a 3.9% increase in asking rents for units over the last year.