Rents rising fast in ultra-tight rental market

In good news for property investors, SQM Research has reported that the rental market has turned even more in their favour.

The national vacancy rate – which measures the share of untenanted rental properties – fell from 1.3% in December to an ultra-low 1.0% in January.

Vacancy rates are very low in all capital cities:

  • Perth = 0.4%.
  • Adelaide = 0.5%.
  • Hobart = 0.7%.
  • Brisbane = 0.8%.
  • Melbourne = 1.2%.
  • Sydney = 1.3%.
  • Darwin = 1.3%.
  • Canberra = 1.6%.

A low vacancy rate means tenants have to compete hard for accommodation. That, in turn, means property investors:

  • Have more market power.
  • Find it easy to attract tenants.
  • Can justify rental increases.

National rents jump 17.4%

Further to that last point, SQM Research has also reported strong growth in the rental rates being asked by landlords over the year to February 12.

Across Australia, the year-on-year increase was 17.4%. For individual cities, the increase was:

  • Sydney = up 29.6%.
  • Melbourne = up 24.8%.
  • Brisbane = up 24.8%.
  • Perth = up 18.3%.
  • Adelaide = up 17.8%.
  • Darwin = up 9.2%.
  • Hobart = up 7.3%.
  • Canberra = up 5.0%.

SQM Research Managing Director Louis Christopher said the rental market appeared to be tightening even further in February, based on a decline in rental listings.

“The ongoing surge in rents is pushing up rental yields, especially with falling prices,” he said.

“I believe ‘would-be’ investors will be attracted to higher rental yields in later 2023, provided the cash rate peaks at below 4% [from its current rate of 3.35%]. However, if the cash rate rises above 4% it is likely home buyers including investors will largely stay away from the housing market for another year, and so investment dwelling approvals will remain in the doldrums, setting us up for another super tight rental market in later 2024 and 2025.”

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Published: 21/2/2023

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