Sydney rental vacancies to hit 4% by year’s end

SQM Researchhas released its rental vacancy series for August, which revealed a small decrease in the national vacancy rate to 2.2% from 2.3% last month; although it was up 0.1% over the year:

Over the year, decreases in vacancies were recorded in Brisbane (-0.3%), Perth (-0.8%), Adelaide (-0.2%), and Darwin (-0.6%), whereas increases were recorded across Sydney (+0.6%), Melbourne (+0.4%) and Canberra (+0.5%), and Hobart (+0.1%).

As shown in the next chart, Sydney’s rental vacancy rate is running at its highest level on record in trend terms (i.e. since 2005):

Moreover, SQM Research believes that Sydney’s rental vacancy rate will peak at 4% by the end of the year:

Residential property rental vacancy rates remained largely steady for the month of August with perhaps the exception of Perth which continues to record a recovering rental market. While Sydney did record a slight decline our expectation is the Sydney rental market will still fall from here. We believe rental vacancy rates will peak at 4% in Sydney by the end of this year.

Turning to asking rents, the picture remains two-speed, with annual asking rents falling across the combined capitals, dragged down by Sydney where rents are plummeting, with Melbourne also weakening:

The situation in Sydney should turn next year, however, with both dwelling approvals and commencements plummeting at the same time as population growth is increasing:

Leith van Onselen

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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