‘Worse than expected’: Rental vacancies hit 16-year low

There’s an ‘acute shortage’ of rental homes across the country but there are some areas in which conditions have turned in tenants’ favour.

Australia’s once in a generation property boom is not only pushing up prices, but is raising weekly rents and squeezing vacancy rates. So, in order to find some relief for renters, one industry insider has crunched the numbers to determine where conditions have turned in favour of tenants.

Online rent review platform, RentRabbit.com.au, has unveiled Australia’s leading suburbs where tenants are gaining the upper hand despite inflating rents elsewhere.

Rents are on the rise

Capital cities, regional areas, houses and units alike all saw an increase in rents over the last quarter according to CoreLogic data, culminating in the highest calendar year growth rate since 2007.

A combination of high rental costs and low stock on the market has created a housing crisis in the NSW mid north coast city of Coffs Harbour. Picture: Toby Zerna

The national rental index recorded an annual growth rate of 9.44 per cent in November, before falling slightly in December to 9.4 per cent.

Rental vacancies have also tightened to a 16-year low. SQM Research this month revealed national rental vacancy rates dropped to 1.3 per cent, down by 0.3 per cent over January 2022.

“We were expecting a drop in rental vacancies over January due to seasonality, however the drops were larger than expected. And worse for tenants, the weekly rental listings in February to date have fallen further for our two largest capital cities,” said SQM director Louis Christopher.

“All this represents an acute shortage of rental properties. And the shortage has already been translating into large surges in weekly rents across the country. It is now very likely market rents will rise by over 10 per cent this year.”

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SQM Managing Director Louis Christopher.

Tenant-friendly suburbs

RentRabbit.com.au’s Better Renting Report identified Sydney’s top 20 tenant-friendly suburbs, but to ensure the postcodes were realistic locations, they were defined as being home to at least 1000 properties and within 200km of the CBD.

Ben Pretty, RentRabbit.com.au co-founder, said the research demonstrated the tough conditions Sydney tenants faced.

“Tenant-friendly suburbs are very much a minority of the market right now. This is all about supply and demand. Where supply is relatively low and demand relatively high, it’s hard for tenants to find accommodation, which leads to falling vacancy rates and rising rents,” he said.

The most favourable suburb for Sydney renters right now is West Pymble where the vacancy rate grew by 3.7 per cent to a more manageable 5.5 per cent and the weekly rent dropped to $850, down from $870 a year ago.

West Pymble is great for renters.

Renter relief across the country

On the national tally, Victoria dominated the latest ranking with 10 suburbs on the top 20 list, while NSW had seven and the ACT three. The top 20 included 12 house markets and eight unit markets. All the suburbs had a vacancy rate of at least 2 per cent, while weekly rents ranged from $310 to $850. Nationally, only three places met all the criteria – Victoria, NSW and the ACT. There were literally no suburbs in the other states and territories that met the tenant-friendly criteria.

Mr Pretty said the research showed the two-tier nature of Australia’s rental market.

“Renters are able to find tenant-friendly suburbs in Melbourne, Sydney and Canberra, but are really struggling to find suitable locations in Brisbane, Perth, Adelaide, Hobart and Darwin,” he said.

Derrimut, Victoria has the most favourable conditions for tenants in Australia.

“For the sake of families and people on average incomes, I’d like to see a more balanced rental market. For that to happen, supply needs to increase, which means we need more investors to enter the market and more new builds to come online.”

Australia wide the greatest shift towards the tenant was seen in Derrimut, Victoria where the vacancy rate ballooned to 10.3 per cent in February 2022 after sitting at 1.2 per cent a year earlier. Asking rents there dropped from $400 a week to $350.

This was followed by Mount Duneed, also in Victoria, where rents remained the same at $420 and the vacancy eased from 2.4 per cent in 2021 to 7.1 per cent this year.

While Sydney’s West Pymble took the third spot nationally, Canberra’s Campbell followed with a stable $550 weekly rent and a change in vacancy from 4.9 per cent to 8.5 per cent in 12 months.

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