Australia: No room at the inn

Residential rental vacancy rates have averaged an all-time low of 1.9 percent across Australia for the past two and a half years, according to data published in the Mortgage Choice/REIA Real Estate Market Facts report, September quarter edition.

This compares with a 20-year average of 3.6 percent. The industry benchmarks anything below a 3.0 percent vacancy rate as indicative of an undersupply of rental accommodation.

Australian Bureau of Statistics data show that all States and Territories experienced population growth over the 12 months to June 2007, ranging from 0.7 percent in Tasmania to 2.3 percent in Western Australia.

‘This has contributed in part to the shortage of housing stock, with the construction of new dwellings lagging well behind demand,’ says Noel Dyett, REIA President.

‘Investors are also behaving cautiously in an environment of interest rate rises, with potential for more to come.

‘As a result of very tight vacancy rates, over the past year, rents have increased significantly right across Australia,’ says Noel Dyett.

Darwin is now the most expensive rental location, with a 34.4 percent annual increase in the median rent for a three bedroom house to $440 per week and a 51.1 percent annual increase in the median rent for two bedroom other dwellings to $340 per week. Sydney and Canberra renters also pay $340 median weekly rent for two bedroom other dwellings.

The cheapest rental location is Adelaide at $255 per week for a three bedroom house, and $205 per week for a two bedroom other dwelling, although this represented annual growth of 8.5 percent and 7.9 percent respectively.

‘Increasing house prices and declining home loan affordability are keeping more people in the rental market, with the short-term outlook difficult for lower income earners in particular,’ says Noel Dyett.

‘Over the medium term, there should be an improvement in vacancy rates, and a slowdown in rent increases, as improved yields make it more attractive for investors to place their funds in the property market.

‘There were double digit annual returns on three bedroom investment houses in Melbourne, Brisbane, Adelaide, Canberra and Hobart in the year to September 2007. Returns on two bedroom other dwellings were even better with only Sydney investment properties returning less than 10 percent.

Three Bedroom Median Weekly Rents
September Quarter 2007

City/Town	Weekly Rent $ (£)	Anual Percenatge Increase
Darwin	440 (195)	34.4
Canberra	350 (155)	9.4
Brisbane	300 (135)	5.3
Perth	300 (135)	15.4
Sydney	295 (130)	9.3
Hobart	270 (120)	8.0
Melbourne	260 (115)	10.6
Adelaide	255 (115)	8.5