Melbourne moves past Sydney for highest vacancy rate

Melbourne has moved past Sydney to have the highest residential vacancy rate in Australia, with the number of empty rental properties surging past 23,000 in the Victorian capital.

Data from SQM Research showed Melbourne’s residential vacancy rate was a new record-high of 3.8 per cent at the end of September, compared to 3.5 per cent in Sydney and 2 per cent in Brisbane.

Melbourne was the only city to record a significant increase in vacancy over the month, with empty properties rising from 3.4 per cent of available stock in August.

At the end of September there was 23,207 properties available to rent in Melbourne, more than double the 11,599 available at the same time last year.

Rents continue to be affected in Melbourne and Sydney, with asking rents down 1.7 per cent for houses and 1.2 per cent for units in the harbour city, while Melbourne rents fell by 0.8 per cent for both houses and units in September.

Perth, Darwin and Hobart recorded increases in asking rents, with Hobart experiencing the highest rental growth in Australia for both houses and units, at 3.2 per cent and 3.4 per cent, respectively.

SQM research managing director Louis Christopher said the data showed rental markets were continuing to diverge around the country.

"Elevated rental vacancy rates in Sydney and Melbourne continue to push city rents downwards," Mr Christoper said.

"This is particularly the case in the CBD and inner ring suburbs close to the CBDs. 

“However outside Sydney and Melbourne vacancy rates are falling again. And then when we consider regional locations vacancy rates have fallen below 1 per cent, which really represents the point of little to no rental vacancy.

“In short, in September the population was still looking to stay away from the large cities. We think this trend may soon reverse, but to what extent remains a mystery.” 

In Sydney, data from the Real Estate Institute of New South Wales indicated rental vacancies rose by 0.4 per cent in September, in contrast to a steady market recorded by SQM.

REINSW chief executive Tim McKibbin said many members had reported the rental market slowing across Sydney, with fewer properties coming to market, and those that do become available taking longer to rent.

“Older properties in need of upgrading are particularly problematic, as tenants become more picky about where they choose to live,” Mr McKibbin said.

Mr McKibbin said regional vacancies remained extremely tight in NSW, with tenants continuing to seek more affordable options away from the main metropolitan hubs.

“Tenants are seizing the opportunity to secure a rental property that suits both their budget and desired lifestyle.

“This month’s results show that COVID-19 continues to have a significant impact across the whole of New South Wales and it’s unlikely that things will settle for a while yet.”

Meanwhile in Perth, rental listings hit an eight-year low in September, with just 2,926 properties available to rent.

Real Estate Institute of WA president Damian Collins said the WA capital was facing a severe rental shortage, and was now on the brink of a rental crisis.

“With Perth’s vacancy rate sitting at 1.3 per cent, it is no surprise that we are seeing listings for rent continue to lower,” Mr Collins said.

“In addition, a number of our regional members are reporting vacancy rates close to zero, so the impact is being felt across the entire state.”

Median rents in Perth remain steady at $360 per week, while it takes a median of 19 days to lease a property, the fastest time to rent a house since June 2013.

Mr Collins said one in three Perth suburbs recorded increases in median rents, with Quinns Rocks, North Perth, Dianella and Como the top performers.

REIWA’s data also showed four of the top 10 suburbs that experienced an increase in retinal demand had a median rent price of more than $400/week - Innaloo, Piara Waters and Nedlands.

“With population growth returning closer to long-term average levels in Western Australia, the state government needs to encourage investment in property to accommodate returning expats and existing tenants,” Mr Collins said.

“There is the possibility we will run out of properties next year unless something is done to entice investors back and encourage first home buying in established areas.”