Prices could rise as vacancies remain low

By Gerv Tacadena | 08 Jan 2020

Australian cities continue to witness shrinking vacancies and inflating rent costs, both of which could spur an upward pressure on property prices this year.

The national vacancy rate currently sits at 2.2%, down from 2.3% a year ago, according to SQM Research. Six of the eight capital cities have vacancy rates of below 2.5%. The other two, on the other hand, have a vacancy rate of slightly above 3%.

Hotspotting director Terry Ryder said many housing markets across the country are experiencing a supply shortage as construction levels for new dwellings and listings decline.

In fact, SQM Research figures show that there was a 14.8% decrease in listings in December, with Sydney and Canberra reporting the biggest declines.

"This helps to explain why we have begun 2020 with prices rising in most cities and in most state regional markets," Ryder said.

Of all the capital cities, Hobart remains the tightest rental market. The city currently has a vacancy rate of 0.5%. The market also remains tight in Adelaide and Canberra, where vacancy rates are at 1%.

"Those three cities all recorded solid growth in rentals, for both house and apartments, over the past year," Ryder said.

The market also remained tight in Melbourne, despite the slight increase in the vacancy rate at 2.2%. While vacancy rates in Brisbane and Perth hovered above 3% a year ago, they are now sitting at 2.5%. These cities are also witnessing growth in rents.

The only cities where rents are not inflating are Sydney and Darwin. In these two cities, vacancy rates are more than 3%. Sydney's average vacancy rate jumped from 3.2% to 3.4%, but some parts of the city saw rates drop.

"Many analysts have forecast supply to tighten further as 2020 progresses, because construction levels have dropped from the recent higher levels and listings of existing homes for sale remain lower than demand in many cities," Ryder said.

The same story goes with regional markets. Vacancy rates in Victoria's Ballarat, Queensland's Mackay, and New South Wales' Dubbo are below 1.5%, helping support attractive rental yields.

"Tight vacancies and rising rentals in most Australian cities suggest there will be upward pressure on prices in 2020," Ryder said.

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