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An urgent boost in rental supply is needed for Australia’s tenants to see an improvement in housing conditions.
Vacancy rates across Australia’s capital cities have continued to deteriorate over the month of February, with the national rental vacancy rate hitting an all-time low of just 0.7 per cent.
Conditions are tightest in Perth and Adelaide, where the vacancy rate is a mere 0.3 per cent in both cities.
According to Domain’s chief of research and economics, Dr Nicola Powell, the rental picture for February may not be as grim as the raw figures indicate.
“While the vacancy rate hits a record low, it’s crucial to consider the bigger rental market picture,” Powell said. “The number of prospective tenants per rental listing is easing, indicating falling competition between renters.”
“This could be an early indicator of an increase in vacancy rates sometime this year,” she proposed.
Domain noted that reasons behind the drop in rental vacancies include rapid population growth, a gridlocked construction sector and soaring property prices.
Powell suggested that the increase in first home buyer schemes across Australia could bring some tenants out of the rental market and translate to a decline in demand.
“There are a number of first home incentives across the states and the prospects of the hotly discussed Help to Buy scheme,” said Powell.
“We’ve seen more first home buyers entering the market. This trend will likely accelerate with the introduction of new incentives for first-time buyers, coupled with the possibility of interest rate cuts,” she added.
If the buying conditions ease, Powell predicted that there is the possibility this could translate to “reduced demand in the rental market and an increase in available rental properties for tenants”.
In the meantime, however, rental conditions for tenants remain incredible tight, particularly those in Perth and Adelaide.
According to Domain, Perth’s vacancy rate “is back at its lowest point on record, 0.3 per cent, and is the most competitive city for tenants, along with Adelaide”.
Even the suburbs with the highest vacancy rates are extremely low, with Mandurah in Perth and Adelaide City in Adelaide seeing vacancies of just 0.7 per cent, despite being the highest-vacancy suburbs in each city.
Sydney and Melbourne have also both hit record lows, with both cities sitting at 0.8 per cent rental vacancy. Regional Australia fared no better in February, with the combined regions seeing the very same vacancy rate of 0.8 per cent.
“A boost in rental supply is needed to see an improvement for tenants,” Domain asserted.
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