SQM Research has released its rental vacancy data for May, with the national rental vacancy rate falling 0.1% to 1.0% – a new 16-year low:
As shown above, rental vacancies are tracking below 1% everywhere but Sydney and Melbourne.
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The next chart plots vacancy rates across the major capitals and nationally:
Commenting on the result, SQM managing director Louis Christopher noted that vacancy rates will likely tighten as immigration rises. He also noted that headline inflation will lift once the ABS’ rental series adjusts to reality:
“Rental vacancy rates continued to tighten across the country and there is nothing yet in the data that would suggest we are about to see a reprieve. The national rental crisis continues on unabated and as a result, asking rents are skyrocketing. Sydney combined rents have risen by 17.5% just over the past 12 months. Brisbane is up by 18.6% for the same period. Melbourne up by 14.8%.
“Reductions in household size, short term stay listings eating into longer term lease availability and now the likely rise in immigration levels, are all factors contributing to this crisis. There will also be ramifications for headline inflation once the Australian Bureau of Statistics update their rental series with the actual market.”
The comment on headline inflation is apt. Over the year to March 2022, ABS’ rental series rose by only 1.0% – less than one-fifth the rate of headline inflation (5.1%):
The reason likely relates to the fact that the ABS measures rents currently being paid across the market, whereas SQM’s and the other private providers measure newly signed rents.
Thus, there is a stock versus flow issue going on here with the ABS’ rental growth badly lagging.
Accordingly, then the ABS’ rental measure will lift sharply, which will add to inflationary pressures.
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