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VACANCY RATES DECREASED IN MAY
But continue to Rise in Sydney and Melbourne
by Louis Christopher, CEO
SQM Research today has revealed the national residential rental vacancy rate has recorded a minor decrease over the month from 2.6% in April to 2.5% in May 2020, with the total number of vacancies Australia-wide now at 86,398 vacant residential properties.
However, the largest rental markets of Sydney and Melbourne recorded rises in rental vacancies. Sydney rose to 4.0%, making it the highest vacancy rate in the country. Melbourne’s vacancy rate had the highest percentage increase of 0.3% to record a 3.1% vacancy rate. Adelaide and Hobart both have the lowest vacancy rate in May at 1.2% each.
The year on year comparison reveals unseasonal rises when the national rental vacancy rate in May 2019 was 2.2% compared to 2.5% recorded for May 2020. Only Perth and Darwin recorded lower vacancy rates compared to this time last year.
Among the capital city CBD locations, Sydney CBD continues to blow out, now 16.2% in May, up from 13.8% in April. Melbourne and Brisbane CBD are also up, now recording 9.3% and 13.3% vacancy rates in May respectively. Melbourne Southbank has risen to 16.8% and Sydney’s Palm Beach is now 16.7%.
Rental listings fell in first week of June
Total rental listings appear to have peaked for now with 98,061 listings recorded on the 9th of June verses 105,277 listings recorded on the 9th of May. There were 95,085 rental listings recorded on the 9th of June 2019. The data would suggest that vacancy rates may drop for June 2020.
Asking Rents
Over the month, Capital city asking rents increased 0.2% for houses but declined 0.7% for units for the week ending 12 June 2020 to record asking rents of $538 per week for houses and $425 per week for units.
Sydney and Melbourne continue to record declines in asking rents for both houses and units over the month. Whilst Brisbane, Perth and Darwin bucked the trend to record increases in house and unit asking rents.
Canberra recorded a 1.0% decline in house asking rents but remained stable for units. Adelaide and Hobart both recorded decreases in unit asking rents of 0.2% and 4.6% respectively but house rents increased 0.9% and 0.6% respectively.
Commentary
After the results for May, we may now be hitting a short-term peak in vacancies. Weekly rental listings suggest a slight decline in supply for the first half of June. I think what is happening here is AirBnb property owners have now pulled back from listing long term and are now waiting this time out in the hope that the borders will be open shortly.
However, with an expected 170,000 dwelling completions for this year and still no imminent opening of the international border, I still think rental vacancy rates are going to remain elevated for 2020. While First Home buyer grants may assist in soaking up some of the new supply, lets just remember the bulk of underlying demand growth in recent years has come from net migration. Also note that many First Home Buyers are tenants.
AUCTION LISTINGS* for week ending 21 June 2020
*Note: To date, most state governments have announced the return to public open homes and on-site auctions this Saturday, some online auctions could be converted to on-site auctions or postponed to a future date. The above counts of auctions represent most recent known auction dates for the coming week.
AUCTION RESULTS for week ending 14 June 2020
Last week, Sydney recorded a final auction clearance rate of 47.9% with Saturday auctions selling better than mid-week by some margin (49% verses 42%). Sydney volumes rose to 530 properties, the highest volume count since the 19th of April. It was a strong bounce in the clearance rate from the previous week’s 40.4%. But still well off pre-crisis levels which were in the 70s back in February.
Melbourne auctions struggled. A clearance rate for the week of 40.3% was recorded with the Saturday results fairing much worse than the mid results (39.1% verses 59.3.%). Volumes rose to 477 properties for the week compared to the 143 for the previous week..
Looking forward to this week, Sydney has 526 scheduled which represents the same volume as last week. While Melbourne has 561 scheduled, which is also up on last week but still well down on normal levels. This will be the first time since the 29th March that Melbourne has more auctions on than Sydney.
Full individual auction results can be found on our website:
DISTRESSED PROPERTY OF THE WEEK
62 Otisco Crescent, Joondalup WA 6027
Located in a quiet street with uninterrupted city views at the rear, is this 3 bedroom, 2 bathroom house in Joondalup, a northern suburb of Perth.
Initially on sale from February 2020 with an asking price of $399,000, the home has been reduced to an asking price of “from $380,000”. It last sold in 1993 for $110,000.
Sitting on a 456 sqm block, the home features 3 bedrooms, 2 bathrooms plus a study or 4th bedroom, a good size laundry, alfresco area under the main roof and a single carport with extra parking. The house was built in 1992 and is in a great location within walking distance to the Joondalup Shopping Centre, HBF Arena, public transport, Currambine Train station, schools, parks and sporting facilities, and is 26km to Perth’s CBD.
Currently, houses in the postcode have asking prices that range from $420,000 to $500,000. Asking prices have remained stable over the month for houses in this area but unit prices have decreased by 1.2%. This area has seen a decline in property listings to 328 listed properties in May 2020 compared to 454 the same time last year. The lower stock levels could account for house prices remaining stable in this area.
The agent states the home is an absolute bargain and could be the cheapest home in Joondalup but does need some TLC. With all the current government grants available, now could be a great time to renovate or redevelop. Take advantage of the Federal Government’s $25,000 HomeBuilder grant for owner-occupiers who build or substantially renovate their homes. The First Home Owners Grant can also apply and save first home owners an additional $10,000.
Asking Rents for houses in this postcode have increased by 3.5% over the month which could indicate a shortage of family homes for rents in this area which seems to be pushing up rents. Units however have experienced declines of 0.6% over the month. Gross rental yield of 4.4% can be achieved for 3 bedroom houses and 4.7% for units.
Vacancy rates have decreased from 3.0% in April to 2.7% in May. All in all, this area is currently looking like a good rental market for houses.
Keep monitoring this market’s growth with SQM Research’s free property data. Also consider the SQM Property Explorer product for more in-depth data and property price estimator.
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