Melbourne pushes rental vacancies higher in November

By Leith van Onselen

SQM Research has just released rental vacancies data for the month of November, which showed a big pick-up in rental vacancies in Melbourne, but continued extreme tightness in Perth:

The key points from the release are as follows:

  • Nationally, vacancies rose slightly during the month of November 2012, increasing by 0/1% and coming to a total of 54,067 vacancies.
  • Melbourne recorded the highest vacancy rate of the capital cities, revealing a vacancy rate of 3.2% and a total of 13,411 vacancies.
  • Perth recorded the tightest vacancy rate of the capital cities, revealing a vacancy rate of 0.7% and a total of 1,302 vacancies.
  • Canberra has recorded the highest yearly increase in vacancies, climbing by 0.8% to 1.3% since November 2011.
  • The only capital city to record a yearly decrease in vacancies was Darwin, falling from 1.3% to 1.1% since November 2011.
  • No capital cities recorded monthly decreases.

According to SQM:

Figures released this week by SQM Research reveal that the level of residential vacancies rose during the month of November, increasing by 0.1% on a national level and coming to a total of 54,067. This is the first time in several months that we have seen a rise in vacancies, coming out of an extended period of modest declines and stagnation during October.

Year on Year, SQM Research has also recorded a modest rise in vacancies – 0.1% nationally, when compared to the corresponding period of the previous year (November 2011).

Melbourne has been pushed up beyond 3% during the month of November, with 3% being the figure that SQM Research believes to be the equilibrium when referring to residential vacancy rates. Recording a vacancy rate of 3.2%, this capital city has experienced a marked monthly increase of 0.4%, coming to a total of 13,411.

Darwin has also experienced a substantial monthly increase in vacancies, climbing 0.4% during the month of November and coming to a total of 1.1%. Although these increases may be perceived as largely seasonal, this could spell some relief for Darwin, which has been recording a vacancy rate of under 1% for quite some time now.

Louis Christopher, Managing Director of SQM Research says, “The rise in vacancy rates this month is the result of a seasonal effect which occurs normally at this time of year. We expect December to also record a rise as well, due to seasonality.” 

SQM’s calculations of vacancies are based on online rental listings that have been advertised for three weeks or more compared to the total number of established rental properties. SQM considers this to be a superior methodology compared to using a potentially incomplete sample of agency surveys or merely relying on raw online listings advertised.

Please go to our methodology page for more information on how SQM’s vacancies are compiled.

Comments

    • but then the US doesn’t have negative gearing which causes a fair number of investors to just hold their properties off the market as has been shown with the water surveys etc in melbourne

      • Actually they can claim the interest cost off their personal income even for PPOR’s and that didn’t hold up prices.

        The NG debate is a bit silly IMHO, it only makes a marginal difference and as an investor I would be happy to quarantine losses and keep them as loss forwards to be claimed at a later date.

        It’s a red herring.

      • TheRedEconomistMEMBER

        “The NG debate is a bit silly IMHO”

        PF… You must be board loitering at this site.

        You clearly are fishing for some responses.

        “I would be happy to quarantine losses and keep them as loss forwards to be claimed at a later date.”

        Are you suggesting any investors whom recently entered the market should lock in a loss now?

        Are you bearish property now?

      • Well I’m bearish on Melbourne property, but I was talking about NG losses not capital losses.

        I was just making the point with serenco that being able to claim the interest cost as a tax deduction didn’t matter much in the USA as everyone can do that, not just investors. He seems to have a different idea on that.

        But let’s not derail the thread, we can discuss NG another day, it has been covered many times.

      • There are a few hundred thousand Aussie property “investors” that would disagree that NG is “silly”.

        Comparing to the US is not a very accurate benchmark. Look at rental yield versus interest costs. Earnings profile of Aust. property versus lending costs is quite different.

        You would think that the sensible “mum and dad” property investor would have the sensibility to do some research on this kind of stuff….but alas they get sidetracked with the Andrew Wilson & Enzo’s of this world

    • Peter, I’m shocked that a man of your experience would compare those numbers. Theres absolutely no basis on which to do that.

      IMO, the numbers here are fairly untrustworthy. But thats not important. As long as the methodology is consistent, they will continue to be a good basis for relative comparison within Aus, and across time.

      • Hi davel – I’m happy to look at alternate data. It is relevant to compare our vacancies to other similar countries, please supply what you have.

      • Nope. If you want to compare them and be taken seriously, then you need to show that the data design, collection and analysis methodology are consistent. Its not on to compare them without any knowledge, and then challenge others to do your proof for you.

        FFS we can’t even compare our own Aus house price indices with any certainty, never mind something as intangible as a vacancy rate across completely different countries.

      • There is almost no methods that compare exactly between countries on any data collection. I understand that the SQM counts listing after they have been advertised for 3 weeks, so the actual number as at day 1 of listing would be higher, but 3 and 4 times higher I doubt.

        My comparison above is far less wonky that the charts that I have seen comparing our house price correction to the 20 year slide in Japan, from someone who really should know better.

      • I remember one commentator before pointing out that the Aussie Vacancy rate has never been above 5% and the US one nver below 5%. There is therefore likely some difference in methodologies…

      • Peter would have thought it better to compare our own rates of vacancy against published rental increase %’s here over the years. I can remember the rental rate being much lower around 06-07 ish so while it is still not high, it is getting better it appears for those renters out there. Would be interested to see if there are correlations with other stats that make sense of the continued increase in rentals.

    • peter, you showed once more how manipulative you are.

      You know very well that US Census rental vacancy rates are not comparable to SQM “vacancy rates” because US vacancy rate measures number of homes vacant (not used as residence) at the moment survey is conducted, while SQM vacancy rate is actually not a vacancy rate but rather measure of excess rental properties. It measures percentage of rental properties not needed for any of the rental purposes including and not limited to renovations and changeovers. Based on SQM methodology, it can be estimated that real vacancy rate (percentage of vacant rental homes) is somewhere around 3-4 times higher.

      You are aware of these differences and my long lasting discussion with Louis Christopher about his methodology, still you choose to compare it with US Census vacancy rate. You are knowingly manipulating public opinion to gain personal benefits (or hoping to gain some).

      It is not responsibility of a reader to disprove your claim, it’s you responsibility to show that data you are comparing is comparable. Otherwise you are just one more manipulator playing on ignorance to gain personal benefits. But that’s what you do for living – driving young people into debt slavery for a fee.

  1. TheRedEconomistMEMBER

    Yes I agree rental is still tight but.

    And historically House Prices in Australia are excessively expensive against any metric when one considers the abundance of land in this nation.

    • There’s plenty of land, but most of its is terribly inhospitable due to distances to reliable water, transport, food sources, employment etc. Lets talk in relation to areas with a rainfall above 12 inches and reliability of say 80% or whatever other metric makes sense (eg the Goyder line), then look at how much land there.

      Or how much land is within 60 minutes of “permanent” employment opportunities.

      Even the indigenous walked out of the deserts in WA within 1 generation after living there for hundreds if not thousands or 10’s of thousands of years.

      • TheRedEconomistMEMBER

        The someone please explain why prices for Canberra are over 600K for you average famuly home!!

        No shortage of Land in the ACT.

      • TheRedEconomistMEMBER

        Then someone please explain why prices for Canberra are over 600K for you average famuly home!!

        No shortage of Land in the ACT.

      • That is a very good question.

        One reason may be that (and this is going off memory) that “Canberra” excludes suburbs like Gungahlin, Hall (etc etc)…..all that was paddock when I lived there 15 years ago. I believe you can pick up a McMansion out there for a lot less than $400k.

      • There’s plenty of land, but most of its is terribly inhospitable due to distances to reliable water, transport, food sources, employment etc. Lets talk in relation to areas with a rainfall above 12 inches and reliability of say 80% or whatever other metric makes sense (eg the Goyder line), then look at how much land there.

        I imagine anywhere within 100km of the coastline from Townsville to Adelaide would meet that criteria.

        Let’s say that’s about 1/4 of Australia’s 25,000km of coastline.

        6,000km x 100km = 600,000 km^2 = 60,000,000 hectares.

        That’s a lot of land.

  2. The increase in vacancy rates for Melbourne confirms water-cooler gossip at my current workplace. As I mentioned on this forum a few weeks ago, a lady I work with has an investment property in Glenferrie and she said it was a struggle to get a new tenant recently – they had to cut the rent twice before finding a renter and it was empty for four months. She was telling me over lunch the other day that her husband has been pushing her to sell it because they “only own half” and obviously it was costing them money while empty.

    If you can afford to have your property empty while waiting for new tenants it’s not a problem but you’ve got to balance that against the sometimes rather large missing rents. Interest, rates and insurance doesn’t stop while your property is empty. There’s a house two doors down from me – a spectacular renovated Edwardian – that rents for $800 a week but it’s presently empty for the second time this year. If it remains empty for two months then that’s about 6 grand you’ve got to come up with from somewhere else (if you are the owner).

    With a softening market you can have some real leverage if you are looking to rent that house for that exact reason – not many people can afford to leave their rental property idle.

    • My husband and I currently rent in Prahran, and always keep our eye on the market in case something better comes up (we are now on a month to month lease). I can tell you that in our price range, $600 – $750 per week, there is plenty of availability around Prahran, Malvern, East Malvern etc. Many houses we have been watching on the real estate sites have been available for 2 months now, with many dropping their rents.

      I also go to lots of OFIs, and gone are the days where there are queues out the door. I am often the only one there.

      Would love to know where all the demand has disappeared to. Perhaps those in the $600 per week + price range have all gone out and purchased? I can’t quite work it out…..

      • My wife and I live in Montmorency. There is a unit next door that was being rented out for about $400/week. The owner jacked up the rent to $430 and the tenants moved. The owner put it back on the market at a rental of $450/week… It lay empty for over 3 months; rent falling from $450 to $430 to $410 to $395 to $385 to $375….eventually it was rented out for $365/week.

        Unfortunately for landlords, tenants are catching on that prices are falling (and fewer people are turning up for OFIs)

    • I agree. I have spoken to friends in Melbourne recently and people are battaning down the hatches for the coming storm.

      A friend who works in second hand car sales tells me that cheap ($2k-6k) usable family vehicles (wagons espeically he tells me) are selling like hotcakes as people sell their weekend cars, sports bikes and sports cars. Even when his company buys these sports car at knockdown prices they can get rid of them unless they let them go for ridiculously low prices.

    • Simple explanation is fewer international students etc. from offhore since 2009, i.e. population (growth) has slowed down a lot….. but the real estate industry and anti immigration lobbies still like to spruik population growth…. Saw evidence as early as late 2010 when a group of Philipino students commenced study and snagged a house rental (via RE agency) in Coburg (inner northern suburbs), first place they looked at….. as they said what rental shortage?

  3. In December 2011 Melbourne had 16,007 vacancies and this pulled back to 12,719 vacancies in January 2012 so there should be a lot of volatility in the figures over the next couple of months.

    • I suspect that this could be due to fluctions in the tertiary student population over the summer break.

  4. I suggest ongoing consumer pessimism, ongoing low rental affordability and the recent downturn in new houselhold formation (and higher householder occupany rates).

    Great parents are worth their weight in gold.

  5. Our landlord attempted to raise the rent again only for me to write a letter outlining that the market is in the proverbial toilet and that if the house was to be vacant for any more than two weeks (combined with their re-advertising costs) that they would in effect be making a loss……..

    I also stated that with the amount of stock on the market that my wife and I could easily find a similar residence for the equivalent if not cheaper price.

    Result……Rent was unchanged…! 😀

    • Failed Baby Boomer

      Well done Christiaan! No doubt your courage was bolstered with knowledge from MB. Maybe you could have considered going for bust . . and asking for a reduction in rental!

      • thomickersMEMBER

        yeah its been done.

        3 of my mates in an abbotsford townhouse got their rent reduced from $700/wk to $650/wk earlier in the year.

        Tennant is customer….and King!

  6. Darwin’s rental availability has improved from 0.7 to 1.1.

    This is not because of more stock on the market but because rents for a two bedroom apartment have gone up from $400 a week to $550 – $600. Electricity is going up by 40% on January 1st 2013.

    People are leaving Darwin in droves due to the outrageously high cost of living.