Canberra's rental crisis is over, says analyst, but on the ground there is trouble ahead

A leading property analyst has declared Canberra’s rental crisis over, but a local industry member says any softening is far from sustainable and there are storm clouds ahead.

SQM Research says in its monthly analysis of the national rental market that an improving vacancy rate and falling rents have combined to put the national capital on a path back to equilibrium.

Vacancies in April were more than double what they were for the same time last year, up from 499 to 1209 for a vacancy rate of 2 per cent compared with just 0.8 per cent.

SQM says Gungahlin at 3.1 per cent and the tight Inner North recorded sharp increases in vacancies, with Braddon at 2.5 per cent and Dickson, Lyneham and Downer at 1.8 per cent.

The biggest vacancy rate went to Woden at 4.2 per cent, while Weston Creek/Molonglo and Tuggeranong recorded 3.1 per cent.

Vacancy rates varied across the districts. For example, Kambah and Wanniassa in Tuggeranong were under 1 per cent, while further south, Gordon was 4 per cent.

Belconnen was tighter than other areas at 1.4 per cent, with surrounding suburbs between 1.5 and 2 per cent.

Combined rents for the month to 12 May are down 0.4 per cent on the previous month for a median of $650 a week.

According to the weekly data, rents in some parts of Canberra are falling fast, particularly for houses that are outpacing units.

House rents fell 1.1 per cent for the month and 0.6 per cent over the past 12 months, but units were up slightly by 0.4 per cent and 0.6 per cent, respectively.

The median weekly rent for a house in Canberra is now $758 and $560 for a unit.

But Canberra’s rents overall remain stubbornly steep and only second to the Sydney market.

Over the 12-month period, they have barely moved, for a combined dip of just 0.1 per cent.

The Property Collective’s Hannah Gill, who is also Real Estate Institute ACT President, welcomed the softening in the market but questioned any talk of the rental crisis being over, especially with Canberra still one of the most expensive places to rent in the country and the improvement in vacancy rates likely to be shortlived.

Ms Gill said that with Canberra’s population set to surge in the next 12 months, a 2 per cent vacancy rate could quickly shrink.

“I wouldn’t say 2 per cent is a healthy vacancy rate,” she said.

“All well and good to have a bit of a softening in the market, but there’s a way to go to make it sustainable.”

Ms Gill observed earlier in the year that tenants responded to that lack of affordability by returning to sharing properties more, which SQM also noted in its latest report.

“Do people want to live in a share house with three or four people? Probably not, but are they forced to because it makes it somewhat affordable for them?”

Ms Gill agreed that more stock had become available in Gungahlin and the Inner North, with a development completed in Gungahlin with about 100 rental apartments.

In fact, Gungahlin offered some of the best value in Canberra at the moment with some quite competitively priced stock, starting with one-bedroom, one-bathroom apartments with no car park.

But Ms Gill said supply remained a significant issue in Canberra

“There are some good signs but they certainly aren’t alleviating a problem that we know still exists and is going to continue to exist because it still comes down to supply,” she said.

Ms Gill said the ACT needed more land released for housing, more stock and a greater diversity of stock.

“We can’t just have one-bedroom apartments; we can’t just have three-bedroom houses,” she said.

“We need a real range of stock and we need it right across Canberra.

“We can’t just have greenfield being built out. We need urban infill. We need townhouses. We need a real diversity of stock.”

Ms Gill warned that the number of development applications being submitted had plummeted and approvals were taking longer.

“There’s not a lot of large completions of stock coming in the market in the next 12 months,” she said.

“There’s a real shortage of stock being completed.”