Tightest rental markets in Hobart, Canberra and Melbourne: Terry Ryder

One of the most consistent linkages in real estate is that the cities with the tightest vacancies are the ones showing the best rental growth.

This, of course, is no great surprise but real estate data often makes no sense. This is one instance where it does.

The figures on rentals and vacancies are among the most consistent in the real estate research field - and it’s an area where competing research sources generally agree with one another, a lot more often than they do on median prices and the level of price growth.

Domain and SQM Research, for example, have comparable figures on vacancy rates in each of the capital cities and also on rental growth.

The two sources broadly agree that the tightest rental markets are found in Hobart (vacancies around 0.5%), Canberra (1.2%) and Melbourne (1.5%).

The highest vacancy rates are in Perth (4% to 5%), and in Brisbane and Darwin (both around 3%).

The respective vacancy situations correlate closely with annual growth in house rentals.

SQM Research says Hobart house rents have grown 8% in the past year, while both sources record 6-7% growth in Canberra and around 5% in Melbourne.

Meanwhile, the city with the highest vacancies, Perth, has the worst rental performance: SQM says house rents have dropped almost 6% in the past year while Domain records a decrease of more than 7%.

Darwin house rents have dropped 5.5%, according to both sources, while both say Brisbane rents are unchanged.

In most of the major cities, vacancy rates are higher for apartments than they are for houses - and this, too, is reflected in rental performance.

Both Domain and SQM record double-digit growth for apartment rents in Hobart and around 5% increases in Canberra and Melbourne.

In Brisbane, where inner-city oversupply is a growing issue, apartment rents are down about 1% overall.

In Perth, where vacancy rates generally are high but especially in the inner-city unit markets, apartment rents have fallen 7% (SQM) or 10% (Domain).

In Darwin, where unit oversupply has been an issue as well, apartment rents are down 8-9% in annual terms.

The overall impression from all the figures is that rents have not matched prices in growth performance, which has resulted in rental yields contracting in most cities.

The only city with a gross rental yield for houses above 5% is Hobart, which sits at 5.4% according to Domain. 

Terry Ryder is the founder of hotspotting.com.au. You can email him or follow him on Twitter.