What's Happening with Regional Rental Vacancy Rates?
By Louis Christopher, CEO
If you haven't been sleeping under a rock, you will very likely be well aware of our outright bearishness towards the Sydney and Melbourne housing markets right now (and to a lesser extent, Brisbane).
This radio interview I did with ABC’s Radio National neatly sums up the issues for these markets. And as also tweeted out last week, we have reiterated that our original scenario (released at the beginning of April) for an up to 30% decline in Melbourne and Sydney markets, following the dire new budget estimates, is very much still on the cards.
But today I actually wanted to point out another new trend we are seeing in the numbers. And that is what is happening in the housing markets of regional Australia including localities that are just outside the capital cities. These are just anecdotes only but there are many of these indeed which strongly suggest to me that our regional housing markets are not just stable, they are on the rise - perhaps for differing reasons.
Let’s consider this chart which is rental vacancy rates for the Blue Mountains which is technically still part of Greater Sydney according to the ABS.
Since the start of Covid-19, rental vacancy rates have plummeted from 3.2% to 1.1%.
It’s the same situation for Sydney’s Central Coast – vacancy rates dropped from 2.7% in Dec-19 to 1.2% in Jun-20.
And Wollongong – dropped from 2.6% in Dec-19 to 1.4% in June.
The story is a little more mixed around Melbourne. For example, there hasn’t been a move towards Geelong – increasing from 3.0% in Dec-19 to 3.5% in June.
But there certainly has been for the Mornington Peninsula – dropping from 1.7% in Dec-19 to 1.1% in June.
And a similar pattern can be seen just outside Brisbane. Consider what we call the Beenleigh Corridor (the region between Brisbane and the Gold Coast) – dropping from 3.2% in Dec-19 to 1.4% in June.
And consider Ipswich -
Or Northern Brisbane which includes Caboolture -
Now as a contrast and a reminder, let’s have a look at the inner city areas once more.
Yep, it is still a very ugly situation for existing landlords. But this shift isn’t just occurring on the city fringes. It is also happening in areas well outside the cities.
Lets’ consider North Coast NSW:
Or the central Tablelands of NSW:
Or Central Coast Queensland:
Or indeed Northern South Australia:
In short, when trolling through our regions, I cannot find one in regional Australia that isn’t recording the same pattern as these ones.
So what does this mean? Well, obviously there has been an unprecedented and sudden shift towards regional living. No doubt this has been triggered by Coronavirus and the discovery that working remotely is now very achievable for many businesses, especially ‘white collar’ services.
The question in my mind is, will this shift be a permanent one or will it reverse back once we have defeated Coronavirus?
I suspect there will be some reversal back. But I also suspect the shift is in part, permanent. I think for employees and businesses alike there have been benefits unlocked that will encourage many to keep the current state of working affairs going well after Coronavirus. For starters there is the relative affordability factor of living away from the very costly city living. Housing prices are much more affordable, rents are cheaper and traffic is minimal. Many enjoy the additional privacy of not living on top of their neighbours. For businesses, the immediate opportunity is the reduced floor space requirement through not having mostly everyone centralised in one office. That will mean a significant saving on office rents. Then of course there are the environmental and sustainability aspects to regional living.
Finally, if there is a more permanent shift to regional living, there will also be employment opportunities, especially in regional centres. Australia has long suffered from its economy being anchored to its largest capital cities. Any diversification to the regional centres could very well be a good thing, long term for this country.
AUCTION LISTINGS* for week ending 2 August 2020
*Note: The above counts of auctions represent most recent known auction dates for the coming week. As at 8 July, Melbourne auctions are back on-line.
AUCTION RESULTS for week ending 26 July 2020
Full individual auction results can be found on our website:
DISTRESSED PROPERTY OF THE WEEK
74 Jingili Terrace, Jingili NT 0810
Situated in one of the most sought after, family friendly neighbourhood of Jingili in Northern Territory, is this solidly constructed home that would make a great family home as well as an investment potential.
The home’s well-planned layout includes 3 good sized bedrooms with built-in robes; open plan lounge and dining area; refurbished Kitchen and separate laundry. A 4th bedroom with its own kitchen and bathroom makes an ideal teenagers retreat. The home sits on an 868 sqm block and has two large undercover alfresco areas, a carport and established gardens.
The home is ready to move into or can be further renovated to suit your needs. It is on sale after lovingly cherished by one family for over 40 years. The home is well-located, close to several schools including Casuarina Secondary College and Jingili Primary school and is also close to Jingili shops and Casuarina shopping centre.
The home was first offered for sale in July 2018 at $629,000 and last sold for $430,000 10 years ago in March 2010.
Currently Asking prices in this postcode have declined by 2.7% over the month for houses but units have increased by 2.0%. Houses in this area currently have a price range of $495,000 to $625,000.
This postcode has seen house Asking rents decrease by 4.1% over the month but rents for 3-bedroom houses and units have been steadily increasing and have now increased by 1.5% and 0.9% respectively. A Gross Rental Yield of 4.1% can be achieved for houses and 5.6% for units. Vacancy Rate has dropped to 1.4% in June from a pre-Covid-19 rate of 2.9% in January 2020.
This home presents an easy-care family lifestyle or investment and will be a popular home for all prospective purchasers.
Darwin currently has some good buying opportunities and it could be worth exploring this market.
Keep monitoring this market’s growth with SQM Research’s free property data. Also consider the SQM Property Explorer product for more in-depth data and property price estimator.
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