18 January 2023

Vacancies up but rental respite to be shortlived as students and workers return

| Ian Bushnell
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There are more vacant properties but not enough to make a difference. Photo: Michelle Kroll.

It may be the calm before the storm for Canberra’s rental market, as it softened in the last quarter of the year with vacancies up on the same time last year and rents in some areas falling though still remaining the highest in the country.

But the seasonal dip in demand and rise in vacant properties due to workers and students leaving the capital is due to end as they return in force, including international students from China.

Two sets of data for December confirm the improved vacancy rate – CoreLogic saying 1.6 per cent and SQM Research a little higher at 1.9 per cent after a long period at 1 per cent or lower.

SQM says in December there were 1129 vacancies compared with 689 in 2021.

CoreLogic says the median weekly rent also fell in December to $681, down 0.7 per cent for the quarter and bucking the national trend but still 4 per cent up for the year.

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In fact, rents nationally increased 10.2 per cent in 2022, a record high for annual rent growth.

House rents in Canberra fell the most, down 0.8 per cent, and units hardly moved, down 0.2 per cent.

Core Logic says Canberra rents have fallen a cumulative 1.1 per cent since peaking in June, following a trough-to-peak upswing of 18.1 per cent from September 2020.

But SQM has the median rising 2.6 per cent to $667 for the month ending 12 January, a 7.1 per cent increase for the year.

It reports that in some suburbs such as Belconnen rent increases have been in double figures.

Director of Property Management at The Property Collective and REIACT President Hannah Gill told Region that cyclical and seasonal factors were at play but the improvement in vacancy rates was cold comfort given they still reflected an unhealthy market.

Ms Gill said the difference was hardly noticeable when rates had gone from a “ridiculously exceptional low vacancy rate to a bit of a less ridiculously low vacancy rate”.

“It’s still very much in investors’ favour in terms of a lack of supply and the fact that this drives up rents or holds them steady,” she said.

Ms Gill said a vacancy rate of 2 to 3 per cent would be acceptable, but Canberra has not had that kind of market in years.

She also doubted that rents had fallen much or at all, although the pace of increases may have eased.

“We’ve been in a holding pattern for the final quarter of 2022 and into the new year we’re going to see it tighten again,” Ms Gill said.

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That was already starting, with her agency receiving half a dozen strong applicants for every property.

“How do you choose? Flip a coin?” Ms Gill said.

Ms Gill said any new stock – mainly apartments – came in short bursts and were quickly snapped up and older houses might soon become scarce.

The high rental yields would be attractive to investors particularly in apartments but the unknown factor for houses was how investors would respond to the new minimum standards for energy efficiency requiring ceiling insulation to be installed.

“Even with the interest-free loans a lot of the investors just aren’t interested,” Ms Gill said.

“I suspect we’ll see from April onwards some of that stock will hit the market.”

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Capital Retro3:06 pm 22 Jan 23

Where is the proof that students are returning and what workers returning are you referring to?

My information is that this January is one of the quietest for business, real estate and rental activity ever experienced.

devils_advocate10:29 pm 22 Jan 23

People aren’t even advertising vacant rentals anymore. If they don’t have a waiting list of people to sign up, they’re using social media to sign up tenants within 12-14 hours. I don’t know how that impacts the stats but the money being paid for very basic properties is astounding.

devils_advocate9:39 pm 18 Jan 23

The only thing that will lower the price of housing is to increase supply.

So long as the ACT continues its ideological war against capital owners and tries to tax its way to prosperity, nothing will change.

It is a shame Ian Bushnell cannot tell the whole story. Canberra rents may be high so a perception of a high yield, but so are the taxes and charges levied by the ACT Govt. Perhaps this journalist should do a little more investigation and realise that we are at a cross roads where holding money in term deposits will yield a much higher and less problematic return that investment properties. This will lead to many investors ditching their investment properties for the money market, leaving even less available rental properties and putting more stress on an already stressed and depleted rental market..

Agree with you ac155, but there are forces in Canberra who not want private owners having rental properties, so they want to make life difficult for landlords as much as possible. This includes increasing land taxes, increasing rates, introducing ‘rental standards’ that they don’t impose on any other housing except for rentals (and they pretend it is for ‘safety’ reasons). The truth is that they don’t want any private rentals at all because they don’t like individual people owning things (the government wants to own everything or get deals with their mates through big investment property companies like Blackrock) and that’s how commies work…

“realise that we are at a cross roads where holding money in term deposits will yield a much higher and less problematic return that investment properties.”

Bahahahaha, too funny.

Investors are going to forego their rental payments, capital gains and taxation advantages for the sweet, sweet returns of *checks notes* 4-5% fully taxed term deposits.

And apparently once they sell up their properties, the house disappears and can no longer provide shelter for another person. The horror of it all.

500k@500/week is somewhere around .05% . That’s if you have the 500k and no finance. Also something like 80% of all residential accommodation in Australia is provided by private investors. Find me a better deal.

I have to see, it’s refreshing that at least you aren’t one of the ‘we are providing a valuable public service’ types of landlord.

devils_advocate2:35 pm 19 Jan 23

Capital gains?

Bahahahaha, too funny.

Have you read any news lately chewy14?

The days of landlords charitably subsidising their tenant’s lifestyle choices may be rapidly drawing to a close.

Oh, so you’re going to ignore the last 20+ years of extraordinary capital growth to focus on the most recent downturn, where prices are still 20%+ where they were 3 years ago?

Bahahahaha.

Strange to see you promoting a property crash though, would be a shame to see all that hard work of charitable, salt of the earth landlords come undone.

I mean they’ve created so much productivity growth in the economy, they deserve even more benefits, subsidies and concessions.

But regardless, surely you’ll be able to bounce back and snap up some bargains when those who’ve overextended themselves face selling up.

Win win.

Charitable landlords subsidising tenants, LOL, I needed a good laugh.

devils_advocate9:47 pm 20 Jan 23

Why would previous capital gains performance influence investment decisions being made today?

Bahahahaha, too funny.

Makes you wonder how some people make their investment decisions really. Lmao.

Well I suppose in reality they don’t make investment decisions at all, rather sitting and hoping that others will subsidise their poor lifestyle choices and then complaining about it endlessly.

Bahahahaha,

So now you think property investors make short term investment decisions, rather than looking at fundamentals and recorded performance over time.

“Makes you wonder how some people make their investment decisions really. Lmao.”

Definitely does make you wonder that, although property investors are typically not very smart, expecting people to constantly subsidise their lifestyle choices so you can’t be too surprised at the ridiculous things they come up with.

devils_advocate11:14 pm 21 Jan 23

So let’s see…

“20+ years of extraordinary capital growth”

“…looking at fundamentals and recorded performance over time.”

“…although property investors are typically not very smart.”

So they made massive capital gains at a concessional tax rate and only invest long-term based on fundamentals… but they’re typically not very smart.

Bahahahahahahahahahahaha

Well be that as it may I can think of *one* person that property investors are definitely beating in the intelligence stakes (and net worth stakes)

It’s the lack of self awareness that makes it even more hilarious

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