Rental vacancy rate fall signals future rent increases

SQM Research has released its rental vacancy data for September, which revealed that vacancies nationally declined by 0.1% over the month and was flat over the year:

Across the capital cities, vacancy rates fell across almost every market in September, whereas the situation over the year was mixed.

According to SQM:

It was a better month for leasing in August, especially in the cities of Brisbane, Perth, Adelaide and Canberra. Sydney also had a relatively good month as well, but vacancies in Sydney still remain elevated and are still predicted to rise before the year is over. Perth and Brisbane are likely to continue to record falls in vacancies over the short to medium term due to current low dwelling completion activity verses increased underlying demand.

As shown in the next chart, a huge volume of dwellings have recently been completed, which has added to the rental stock:

However, both dwelling approvals and commencements have collapsed, which signals that the rental market will tighten over 2020 and 2021, given the ongoing strong population growth.

Meanwhile, asking rents remain two-speed, with sharp falls across Sydney offsetting rises elsewhere:

Unconventional Economist

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

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