The Australian property market has long been a subject of interest and discussion, with one of the most pressing concerns being the steady increase in rental prices across the country.
Playing a significant role in the current cost of living pressures, increased rents result from many variables; the two most commonly spoken about are the increased cost of borrowing for investors and landlords, and the low availability of properties for rent.
The RBA has held interest rates for the last three meetings, and there are indicators that this may continue in the short term. This has taken some pressure off the cost of borrowing, therefore driving increased rents.
On the question of rental availability in the market, the fundamental economics of supply and demand plays a pivotal role. Migration, population growth and lifestyle choices are driving forces behind increases in demand for housing. Further land (un)availability, stringent land use restrictions, zoning restrictions and increased developer risk have hindered the construction of new rental housing.
Rental vacancy rates show the imbalance between the supply and demand for rental housing. IPN’s recent August Rental Index Report highlighted that rents are still rising and vacancies are still very low.
So, are there any markets where a balance exists?
Before we can answer that question, we must establish the vacancy level that would reflect a balance. We have set that at 3%, but a vacancy rate above 5% would certainly indicate a better balance between supply and demand. So, how many regions have vacancy rates above 3% and are there any over 5%? Here’s what we found from our analysis.
Including capital cities, only 13% of local markets across Australia had vacancy rates above 3%. Not surprisingly, this increases to 20% in regional areas. House vacancies dominate the list; there are only 91 regional areas across all of Australia where units have a vacancy greater than 3%. Further, there are only nine regional areas where unit vacancies are greater than 5% and 156 regional areas where house vacancies are greater than 5%. These numbers support what we already suspect. We are a long way off balancing Australia's supply and demand equation. Our analysis indicates there are only a few pockets around regional Australia where there may be a greater balance, but even these may just be anomalies as markets re-adjust post pandemic. Here’s a snapshot of each State and Territory.
NSW
In Australia’s largest state there are no signs of the rental market easing with only a handful of areas with vacancy rates above 5%. The Tweed Valley mirrors the state’s vacancy rate at 1.7%, but one of its sub-areas bucks that trend, Terranora with the highest vacancy rates in NSW, at 7.8%. Not far behind, the suburbs of Alectown, Trundle and Bogan Gate in Regional Parkes have vacancy rates of 7.7%. In the Richmond Valley, Bangalow has a vacancy rate of 7.3% and its close neighbour, Mullumbimby, is at 4.8%. Port Macquarie have seen a significant improvement in vacancy rates, now at 6.7%. Rounding out NSW, the suburbs in and around the Walgett have a vacancy rate of 6.3%.
Victoria
Our second largest state has a vacancy rate of 1.7%. West Wimmera in the Grampians has the highest vacancy rate in Victoria at 7.4%. The numbers fall quickly from there, with Delacombe at 5.8%, Flinders at 5.7%, Ararat at 5.3% and Longford and a few suburbs around Mildura at 4.8%. With Victoria tracking to outstrip NSW ‘s population, this is should be a concerning indicator.
Queensland
Queensland is the second tightest rental market, with a vacancy rate of 1.3%. Suburbs west of Rockhampton in the Central Highlands-West area have the highest vacancy rate at 7%, followed by Jacobs Well at 6.3%. South Maclean comes in at 5.5%, Landsborough regional areas around Townsville at 4.6%.
Western Australia
Western Australia’s vacancy rate is tight at 1.5%. It only has seven areas where vacancy rates are above 3%, and these are in fairly remote locations. In Esperance, suburbs such as Hopetoun, Dalyup, Gibson and Grass Patch have one of the highest vacancy rates in the country, at 8.9%. Roebourne, which includes Dampier and Wickham, has a vacancy rate of 7.9%. Ashburton’s vacancy rate is 6.33% and Kambalda Goldfields’ is 5.71%
South Australia
Our recent report indicates SA has the lowest state vacancy rate at 1.2%. So, it is no surprise that only five regional areas in SA are above 3%. Naracoorte is the highest at 6.7%, with Wattle Grove close behind at 6.4% and Roxy Downs at 5.1%. The vacancies then quickly drop to, 3.6% in Adelaide Hills and 3.3% in Port Pirie
Tasmania
Tasmania has the highest vacancy rate, at 1.8%, Yet it is still hard to find consistent evidence of a supply & demand balance. The Southeast Coast fairs the best, with suburbs in the Triabunna-Bicheno area having the highest vacancy rate at 5.9%. Cygnet and Central Highlands are at 5%, and Geevston-Dover at 4.8%
Northern Territory
Berrimah has a vacancy rate of 11%, the highest of our data range. Only three more areas in NT are above 3%: Alligator at 4.1%, Tiwi at 3.7% and Durack-Marlow Lagoon at 3.3%
ACT
Weetangera has the highest vacancy in ACT at 8.1%, followed by Fraser at 6.9%, Red Hill at 6.6%, Chapman at 6.5% and Throsby at 6.1%
There is no state, territory or region that is getting the balance right. Until we do, the pressure on rental prices will continue. Sustainable solutions will likely require a multifaceted approach that addresses both the demand and supply side of the equation while considering the broader economic context and the interests of all stakeholders involved.