SQM Research has released rental vacancies data for March, which revealed a 0.1% monthly fall in the national vacancy rate to 2.0%. Year on year, vacancies are also down 0.1%, bucking the trend for the first time in several months where we have witnessed a loosening of vacancies when compared to the corresponding period of the previous year:
According to SQM:
Melbourne’s vacancy rate continues to tumble, now currently recorded at 2.1% – a figure it has not reached since September 2010. The capital city recorded both the largest monthly decline (0.3 percentage points) and the largest yearly decline (0.5 percentage points).
In addition to this, as you can see from the table below, Melbourne’s asking rents have been up on a monthly, quarterly, yearly and 3 year basis, signalling that landlords have been comfortably able to lift their rental asking prices in this capital city.
We can see from this that the city of Melbourne’s rental market is starting to reveal signs of strengthening, after a long period of elevated vacancy rates in comparison to other capital cities. However, we do note that Melbourne CBD continues to record high vacancy rates (postcodes 3000= 4.7%, 3006= 4.9% and 3008= 4.5%).
Managing Director of SQM Research, Louis Christopher says, ‘The national rental market remains largely stable, even while we have recorded falls in vacancy rates for March, which is normal for this time of year. The results out of Melbourne are the exception however, with a tightening rental market becoming apparent. Our warning on certain capital city CBDs remains and indeed with the large surge in dwelling approvals, we strongly believe CBD vacancy rates are set to climb from already elevated levels as we head in 2015 and 2016.’
It is worth noting that Melbourne’s rental yields are by far the lowest in the nation at just 3.3% for houses and 4.1% for units, according to RP Data (see below charts).
So it could be that the recent tightening in Melbourne’s rental market represents some kind of catch-up.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
