Are you a fan of Melbourne, but worried about the city’s much discussed oversupply of stock? If so, the latest SQM rental data should make for cheering news.

According to SQM’s February figures, although Melbourne still has the highest overall vacancy rate of the capital cities, that rate has dropped by 0.5% - leaving it at 2.4% which is the lowest since May 2011.

SQM Research director Louis Christopher said the general trend has been downward for many Melbourne suburbs. These included Eastern Melbourne, Inner East Melbourne, Melbourne North and Melbourne West.

“It has been some time since we recorded a definitive decline in vacancies. It could be a sign that the excess stock seen in Melbourne is starting to be occupied.”

While the Melbourne CBD also recorded a fall in February, Christopher said he would still warn investors about the area’s vacancy rate. This was because the CBD’s vacancy rate was still up compared to this time last year.

REIV CEO Enzo Raimondo said the SQM data was consistent with his organisation’s vacancy rate information which showed vacancies have fallen in Melbourne since December.

“This is positive news for investors, with strong capital growth in Melbourne in the past six months and low vacancy rates.”

However, REIV data also showed that inner city vacancies were on the rise, due to the over 30,000 apartments planned for Melbourne’s CBD in the next two years.

Raimondo said that properties in middle Melbourne appeared to be more sought-after, with lower vacancy rates and solid prices providing a strong case for investment.

Meanwhile, the SQM data also showed the national vacancy rate actually decreased during February to record a 2.1% vacancy rate.

Christopher said that, year on year, vacancies had still risen by 0.3 percentage points. This meant the country was experiencing a substantially looser rental market than this time last year.

Of the capital cities, Perth recorded the highest yearly increase in vacancies. The city’s rate has gone up 1.0 percentage points to 1.9% since February 2013.

The city’s rising vacancies, along with sharp falls in asking rents were a manifestation of a rapid decline in the demand for accommodation, Christopher added.