Back in February, the Canberra Times reported heavy discounting from landlords amid an influx of new developments that had reportedly pushed rental supply to 15-year highs:
AN INFLUX of developments has pushed Canberra’s rental market to new levels of supply as anecdotal reports of discounted rents begin to emerge.
The vacancy rate is approximately 3 to 5 per cent, according to Badenoch Real Estate principal Symon Badenoch, who said there were more properties on the rental market now than he had seen in 15 years.
He said traditionally demand had been higher than supply in Canberra, but the market had softened and owners who could not sell had turned to renting…
”You are getting 150 units being completed behind another one – and another one,” he said. ”Suddenly you are getting 1200 properties added to the rental market in one hit if they are not picked up by buyers who want to move in”…
The last review from property adviser Herron Todd White also alluded to rental discounts as more developments throughout Gungahlin, Belconnen and Molonglo add to the supply.
”We are expecting to see a surge in supply of rental properties which could possibly lead to very competitive rental pricing within the market,” it stated.
The reported glut of rental units was supported by dwelling completions data release yesterday by the Australian Bureau of Statistics (ABS), which revealed an ongoing boom in apartment and unit construction (see next chart).
Rental data released last week by Australian Property Monitors (APM) also showed that Canberra unit rents remained flat over the March quarter, but were down -2.3% over the year (see next chart).
The contraction in Canberra unit rents is also confirmed by SQM Research’s asking rents series, which showed unit asking rents falling by nearly -5% over the past year (see below chart and table).
Overall, it looks like a bad time to be a landlord in Canberra, although dwelling approvals data does suggest that the unit & apartment construction boom will soon come to an end (see next chart).
To date, Canberra dwelling values have not followed the rental market, and have held-up well. Nonetheless, there is the risk that the election of an Abbott-led federal government later this year could result in austerity measures across Canberra, which would reduce public sector employment and recruitment, and reduce demand for housing in the capital. As a point of reference, after the Howard Government was elected in March 1996, and began cutting spending and jobs across public sector agencies, Canberra dwelling values fell by -8% and did not regain their value until March 1999, according to RP Data-Rismark.