This Week in Real Estate – 13th October 2022

Slim Pickings For Renters

There are slim pickings for tenants with concerns some will be forced to accept sub-par properties as it becomes harder than ever to find a rental property in many Australian cities. The national vacancy rate is stuck at 0.9% for the third month in a row, while a vacancy rate of 3% is considered a balanced market. Figures from Domain show Sydney’s vacancy rate fell to 1.1% in September while Melbourne held steady at 1.3%. But it is the smaller capital cities where tenants are really struggling to find a rental with vacancy rates of just 0.6% in Brisbane, 0.5% in Hobart, 0.4% in Perth and a near non-existent 0.3% in Adelaide. NAB head of market economics Tapas Strickland says it will continue to be tough on renters. He says rents will continue to rise because of increasing interest rates, higher international migration numbers and fewer properties being developed as a result of materials shortages and rising building costs.

Quote of the Week

“Once interest rates have stabilised, higher yields coupled with lower values and stronger buying conditions, could entice more investors to enter the market, which would ultimately help raise rental supply.” CoreLogic Research Analyst Kaytlin Ezzy

Yields Are Bouncing Back

While bad news for renters the good news for landlords is that rents are growing faster than home prices leading to better yields. The latest NAB sentiment survey, which polls property industry professionals, predicts rents will grow by 3.5% in the next 12 months and 3.8% nationally in the next two years. CoreLogic Research Analyst Kaytlin Ezzy says rental yields are bouncing back. She says nationally during the September quarter dwelling yields grew by 24 basis points to 3.57%. Although yields are now above the record lows recorded in February (3.21%) they are still well below the pre-pandemic decade average of 4.24%. Ezzy says with interest rates expected to continue rising throughout the first half of 2023, putting downward pressure on house prices, it’s likely yields will continue to improve. “Once interest rates have stabilised, higher yields coupled with lower values and stronger buying conditions, could entice more investors to enter the market, which would ultimately help raise rental supply.

Clearance Rates On The Rise

Auction clearance rates are on the rise, hitting their highest level since May with a national clearance rate last week of 63.4%. The number of properties being offered for auction is also on the increase, up 11.2% on the previous week and 36.7% higher than the week before that. The smaller capital cities continued to record the strongest results with Canberra recording the highest clearance rate of 70.9%, followed by Adelaide 69.7%. Melbourne’s clearance rate was 66.1% while Sydney’s was 61.3%. Brisbane’s auction clearance rate took a dive, to 49.4%. Despite the growing number of auctions, CoreLogic says last week’s auction activity is still significantly below the number of auctions held this time last year, when selling conditions were stronger and clearance rates were higher. Louis Christopher of SQM Research says it is now clear that clearance rates bottomed out in July, and he expects the remainder of the spring selling season to be better than it was initially expected to perform