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Competition is easing – does that mean vacancy rates will rise?

By Juliet Helmke
06 February 2024 | 11 minute read
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Domain’s figures for January 2024 reveal that the national vacancy rate has unfortunately returned to its recent record low, but the firm’s latest findings do contain at least one glimmer of hope for renters.

After a seasonal rise in vacancy rates in December 2023, economists at the online listings portal reported that Australia’s vacancy rate fell back to 0.8 per cent in January 2024. Major cities drove the trend, with vacancy rates in Sydney back at a record low, while Melbourne, Adelaide and Perth are close to an all-time low.

The change was not a surprise, as Domain’s chief of research and economics, Dr Nicola Powell, explained.

“It was expected that the rental market would tighten in January as the increased demand absorbed December’s supply boost,” Dr Powell said.

She was able to report, however, that user activity on rental listings could mean that a slight easing of the extremely tight conditions is in sight.

“The glimmer of hope for renters this year does remain as we are likely moving into a period of slower rental growth and the number of prospective tenants per rental listing is easing,” she said.

“This suggests that rental demand is pulling back and while it hasn’t been enough to boost the vacancy rate, it could be on the horizon,” Dr Powell reported.

Another factor that could come into play in vacancy figures is the new first home buyer incentive, which is set to assist some renters transition into home ownership. Any potential rate cuts, too, will shift demand from rentals into sales.

“We anticipate a tipping point to be reached at some stage this year, making a return to a more balanced rental market,” Dr Powell noted.

Zeroing in on the capitals, Sydney had the greatest level of demand with the highest increase in average views per listing on the site, Domain reported. Accordingly, the city’s vacancy rate fell to a record low of 0.9 per cent. Vacancies in Melbourne also fell to 0.9 per cent, though remained 0.1 per cent higher than the historic low level recorded in the city.

In Australia’s two largest cities, however, average views per listing have been trending downward overall since mid-2023 and are expected to continue on this path despite occasional surges.

Brisbane experienced its first monthly decline in the vacancy rate since September, sitting at 0.8 per cent. Perth was the only city to hold steady, with an extremely tight rate of 0.4 per cent.

Dr Powell noted that in such a stubbornly tight market, rental stock will need to experience a significant boost before conditions improve for tenants.

But it’s Adelaide that holds the crown as the most competitive city for potential tenants, with its vacancy rate falling to 0.3 per cent and 0.1 percentage points off its record low.

Darwin’s vacancy rate declined to 1.4 per cent, the second highest of the capitals, while Canberra’s vacancy rate decreased to 1.5 per cent. The nation’s capital experienced the largest monthly change of all the major cities, however, conditions remain less competitive for tenants relative to the other capitals.

Competition is easing – does that mean vacancy rates will rise?
nicola powell domain 2 reb w0wjvv
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Juliet Helmke

Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.

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