SQM: Rental market has stalled

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By Leith van Onselen

SQM Research has released its rental market report for July, which revealed a slight drop in the number of vacancies but a stable rental vacancy rate of 2.3% (see below table).

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According to SQM:

Each capital city continues to tell its own unique story, with Perth and Darwin’s vacancies soaring since this month in 2013, and Hobart’s dropping substantially over the same period. Sydney has remained steady, revealing no yearly change and similarly, Melbourne has recorded a vacancy rate of 2.6% – identical to its July 2013 vacancy rate.

SQM has also released its latest asking rents data, which shows rents posting below-inflation growth nationally over the past year (1.2% for houses, 1.7% for units), with Darwin and Sydney being the only two capital cities to record substantial increases in asking rents since this time last year, and Perth and Canberra both recording considerable decreases during the same period (see below table).

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SQM’s managing director, Louis Christoper, explains the results as follows:

“The rental market overall remains sluggish with asking rents showing rises of just 1.2% to 1.7% at the average capital city level. Perth rents have dragged down the overall result. It’s quite clear rents in Western Australia are falling quickly.

“Given our view that vacancy rates are likely to rise from these levels we are expecting a soft rental market for quite some time and certainly, well into 2015.”

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  1. “The rental market overall remains sluggish with asking rents showing rises of just 1.2% to 1.7% at the average capital city level. Perth rents have dragged down the overall result. It’s quite clear rents in Western Australia are falling quickly”

    If it is remaining ‘sluggish’ (gotta love that word, soft, vulnerable, slow, fat and just waiting to be stepped on) then Canberra’s rental market is looking very much like a bowl of jelly – quivering just waiting for another tremor to send it into free-fall.

    Back in December 2007 we rented a 3 bedroom townhouse in inner Woden for $320 per week – last year after annual rent increases of $20 per week (to $440) the rises stopped. This week we are moving into a new 3 bedroom trendy apartment right next to work in Belconnen for $380 per week that leaves our tired old rental wallowing in the dust (currently advertised for $420 – buckley’s chance of getting it rented at that price – further drops coming).

    Rents in Canberra are facing some pressure and if we do head into that awaiting recession then I would expect that pressure to spread nationally – looks like it already is.

    Bring it on, the only way we can get thru this distorted period in Australia’s history is to have some pain before we can come out the other side looking a bit leaner, more agile and fairer minded to our fellow Australians.

    No more fat slugs please……..

  2. The Darwin rental costs are a national disgrace and a testament to the complete failure of NT housing/land supply policy.

    • Absolutely, though even Melbourne that is supposedly drowning in ‘ghost apartment’ blocks is only 2.6%.

      When all those figures start with a 4 instead of a 1 or 2 we will start to see the cost of renting and buying bearing a much healthier relationship to income.

      That can happen in a variety of ways.

      * The population ponzi slows right down

      * New constructions continues to increase

      * A bunch of temporary residents decamp

      A combination of a slowing population ponzi scheme and further expansion of construction would be the best combination.

      A fundamental role of government should be to ensure there is sufficient housing stock to result in a very competitive market for vendors or landlords.

    • It’s a testament to corruption and the amount of big fish in a very small pond who influence public policy.

      Nobody talks about it but corruption and the old boys club is running rampant, all at the expense of the taxpayer and little guys.

      • I should also add that successive governments, both red and blue are to blame for the under supply.

        However there has been a lot of apartment construction and there is double the amount of stock available on the market compared to a year ago.

        We are starting to see a stablisation in prices, but not many price drops yet as August is the peak of the selling season.

        November will be interesting, when the the humidity gets up to 80% and its stinking hot. Many people move down south then as they can’t face another wet season. I expect there to be a dramatic increase in properties then and an air of urgency set in with sellers.

    • Forrest GumpMEMBER

      Lemme. REIWA only has around 40% of the rental market, so of the 40% they are spruiking a vacancy rate of 4.1%. The remaining 60% of the market are those that don’t use REIWA or go it alone. (As in the case of my landlord)

      Keep in mind that REIWA is now aware of the rising vacancy rate and are probably masking the truth.

      The truth is according to REIWA’s website. their advertised vacancies are rapidly increasing as follows.

      I have noticed where I live that rentals are remaining vacant for very long periods of time. (in some cases up to 3 months and counting) Compared to 2 years ago, there was never a dull moment here in leafy East Perth, now there are lots of empty units.

      Source REIWA. Vacancy Rates
      09/10/2013 3885
      13/02/2014 5039
      20/07/2014 6023

      And like you said. REIWA’s vacancy rate has remained at 4.1% over this period!

      • innocent bystanderMEMBER

        East Perth always reminds me of those Chinese ghost cities – after dark/weekends it is a ghost town.
        You mean to say those units are occupied?

      • Excuse me..not sure how many times we have had to say this but REIWA and SQM have different methodologies which include a different take on what constitutes the city of Perth. SQM go on the SD of Perth as measured by the ABS. REIWA go off a more metro version of Perth.

        If you want a better geographical comparison, then grab the Perth City region chart from SQM, which records this:

        So before judging who is better or worse..do your research..

      • The SQM Perth City region records 670 vacancies at 6.9% VR.

        The SQM City:Perth region records 4950 vacancies at 2.5% VR

        The REIWA Perth region records 5950 vacancies at 4.1% VR

      • We know they go off a smaller regional base but I don’t know the exact boundaries they use. I have just noticed that our Perth city region has appeared to be closer to their vacancy rate they record over time, Indeed we have the vacancy at 6.9% right now.

        As mentioned its also an entirely different methodology.

      • FG you will notice in the SMQ report that 6000 YoY vacancy increase equals 0.2% nationally so the numbers do seem to stack up as suggested.

        In my area also detached houses languish waiting to be leased or sold. Similar look to 2009 + available rentals as there was a 0 vacancy in rentals back then until just a month ago.

        How quickly things can change.

  3. Rent Seeking Missile

    Watching ads for rentals in the inner west in Sydney in recent months, I’ve noticed a softening in the market.

    Quality of stock on offer has improved, while weekly rents appear to have fallen $20-$40 per week.

    • macrofishMEMBER

      I am in the north shore and got offered a week free rent and it was already $40 cheaper then its original listing

      • Rent Seeking Missile

        My apartment block has a ‘for lease’ sign out the front.

        On the weekend, it had a ‘leased’ sticker on it.

        Last night I noticed that the the sign was still there but the sticker had come off.

        Yes, great news for renters. But it’s going to put stress on the investors who need to make the repayments – and the banks who are waiting on that money if it doesn’t arrive on time.

      • Rent Seeking Missile

        Except that you, me and every other Joe and Joanne Bloggs will end up footing the bill for ‘Too Big To Fail’. (I suspect).

        But I really am pleased to see the market soften. It is just nuts here in Sydney.

      • I was talking to a senior NAB banker over a (quite) a few drinks a couple of weeks ago.

        We got onto the topic of property and he said that the banks had learned from the 1990’s recession and were not going to fire sale properties this time. They learned from their last disaster, this time they are going to keep the properties and rent them out. They don’t want to destroy their capital with mass sell offs.

        I didn’t say it but my internal dialog was one word –


  4. Without the stats in this article it was already obvious to us just how slow things are when the neighbouring property was vacant for 10 weeks, May to July, before a new tenant moved in. We were particularly interested as the property is a mirror image house with the same agent and landlord. We had lots of competition from other prospective tenants around the time we were searching 3 years ago and secured our house.

    The neighbouring property was advertised with what amounted to a 5 or 6% increase in rent on the previous lease (to long term tenants). After 5 weeks the advertised rent amounted to just a 3% increase and finally the advertised rent matched the previous rent.

    Overall the rents on these two houses have barely shifted 2% in three years.

    • innocent bystanderMEMBER

      obviously yr agent is a professional property manager with their finger on the pulse, looking after the owners interest and keeping maximum occupancy /sarc

      • Professional property managers are in for a tougher time than they can imagine. Historically they had tenants who were rent slaves many could not afford to ‘move’ the up-fronts and costs being beyond them.

        Now many renters are of a different financial background and will CRUNCH rents lower when they sniff blood. Maintaining the appearance of rent stability will be much more difficult with this group of renters.

        Offers of $1-2 hundred below asking should be encouraged.

        The fear of having an un-employed tenant will be a powerful bargaining chip