Large rental price increases across property markets: Pete Wargent

EXPERT INSIGHT

The national residential vacancy rate fell from 2.1 per cent to 1.9 per cent in April.

But these figures mask some serious variances across the country.

CoreLogic has already reported rents turning vertical in some markets, and now SQM Research is seeing the same.

This will eventually feed into inflation figures (although the ABS uses a measure of all rents, not just newly let properties, which will dampen the inflation impact a little). 

Sydney's vacancy rate fell to 3.1 per cent in April, now well down from 3.9 per cent a year earlier, and gradually tightening. And Melbourne saw its vacancy rate drop from 4.4 per cent to 4 per cent in April as confidence returns in the city economy. 

There are still relatively high vacancy rates in the CBD markets as offices remain only half full, while tenants have often eschewed density over the past year.

SQM believes that household sizes have declined, as people shun living together in groups through the pandemic, which intuitively makes sense. 

Almost everywhere else rental markets have tightened dramatically. 

Brisbane's vacancy rate fell to 1.4 per cent from 2.8 per cent a year earlier, and every other capital city is now very tight at under 1 per cent. 

Some of regional markets have reached crisis point.

I've seen it first hand in Noosa, while SQM noted that the Gold Coast and north coast of New South Wales have often seen rental price hikes of about 30 per cent for houses.

Some parts of Perth are seeing the same. 

This again goes to demonstrate how 'macro' figures are only so useful for property market participants.

Immigration is effectively 'switched off' at the moment, yet many rental markets are now feeling the pain of the preceding credit squeeze on investors, with rental supply approaching crisis point.

ACT case study

There was a bit of a debate some years back, where I suggested to a few economists that Canberra's property taxes would lead to spiralling rents, making Canberra the most expensive place in the country to find a rental.

My contention was essentially thus:

1. Economists say property taxes won't lead to rent increases
2. Property taxes ratcheted up apace
3. Rents spiral
4. Economists say record high rents are actually because of something else

Or something like that anyway. 

COVID-19 threw in a major interruption to normal service last year, but now the double digit increases for Canberra's asking rents are hoving back into view. 

In September 2014 the median asking rent for a house in Canberra was $465/week, while today it has increased to $690/week and now looks set to spike much higher on SQM's data series. 

As such Canberra will take out the title as most expensive capital city in which to rent this year, eclipsing Sydney and Melbourne, although the jury is still out on the role of property tax. 

Asking rents for units increased more modestly from $370/week for $490/week over the same time period, although one suspects that data series has partly been skewed higher by the relatively high number of new units constructed in the nation's capital.