Brisbane Rental Vacancy Rate Tightens

Rental vacancy rates across many areas of Queensland have tightened over recent months, according to the latest Real Estate Institute of Queensland (REIQ) data.

The REIQ’s September residential rental survey found the low number of investors in the property market contributed to the tightening of vacancy rates between June and September this year.

“The number of investors in Queensland continues to be below historical averages. What this means is that there is not the usual number of investment properties being added to the overall rental pool, which is putting a strain on supply,” REIQ managing director Dan Molloy said.

“The recent interest rate cut, as well as soft property prices, are likely to make investment property a more attractive proposition for investors so we will hopefully see more activity from this type of buyer in coming months. Many renters are also opting to stay put, perhaps due to the ongoing economic uncertainty, which is also have an impact on supply.”

The vacancy rate in Brisbane is 2.3 per cent. Brisbane City’s vacancy rate eased slightly, largely due to easing conditions in the 5km-plus zone, despite Inner Brisbane experiencing tighter vacancy rates since the end of June.

In terms of median rents from the Residential Tenancies Authority, these tighter conditions have only been reflected in weekly rents in the south-west and north-western suburbs, both up $20 and $25 over the September quarter for three bedroom houses. For the outer suburbs, new developments coupled with the return of renovated flood- affected properties coming back into the rental pool have contributed to the increase of supply.

Inner Brisbane Vacancy Rates Under Pressure

Vacancy rates in Inner Brisbane are under pressure, as population increases and a shortage of new supply sees available properties dwindle, says leading property researcher Michael Matusik. Mr Matusik, director of Matusik Property Insights, said the tight vacancy rates could be attributed to a relative lack of new development in inner Brisbane, which is experiencing a resurgence in its popularity with new residents. “Inner Brisbane is attracting an average of around 5,000 new permanent residents per annum, and that is expected to continue over the next decade, whereas in the 1990s it was losing permanent residents,” he said. “The change can be credited to a shift in demographics, with an increase in lone person households and couples without children in the precinct, who are looking for a lifestyle of convenience close to amenities and transport to the CBD.”

Inner Brisbane suburbs Milton, Paddington and Rosalie are leading the charge, with figures from the Residential Tenancies Authority showing rent in these areas have risen by about 5.6 per cent over the past 24 months.

Mr Matusik said Milton was a prime example, where vacancy rates had plunged to just 0.7 per cent, with a vacancy rate under 3 per cent considered to be undersupplied. He said about two-thirds, or 62 per cent, of households in Milton were renting, which was representative of other inner city precincts. Mr Matusik said dwindling vacancy rates were not expected to improve in the short term, with the undersupply of new stock set to continue.

“For example, Milton has recorded the second highest population growth in Inner Brisbane at 4.4 per cent per annum over the past five years, just behind Kelvin Grove, which has led to its extremely low vacancy rate,” Mr Matusik said. “It is part of the Inner West precinct, which is one of the most undersupplied markets in Brisbane.

“Just 10 per cent of the current supply of new apartments for sale in Inner Brisbane are located in the Inner West, with FKP’s The Milton the only project currently selling off the plan.”

Rentals

After the temporary surge in demand for rental properties following the natural disasters at the start of this year, Queensland’s rental market has returned to a more even keel, according to the Real Estate Institute of Queensland (REIQ).

The REIQ residential rental survey conducted at the end of June has shown vacancy rates across most of the state returning to more normal levels following the extreme weather conditions and peak demand of earlier this year.

The Residential Tenancies Authority’s (RTA) latest median rents for the June quarter also show total residential bond lodgements easing, as well as rents stabilising, for most major regions across the State.

“In some other much-needed good news for our property market, investors are also again starting to take an interest in Queensland. The latest ABS lending finance figures show the number of investment dwellings financed in Queensland over the June quarter increased about 16 per cent with investors now accounting for 30 per cent of the market.”

In Brisbane City, vacancy rates across the local government area (LGA) have eased to 2.1 per cent however this easing in rental demand occurred in the middle to outer-ring suburbs alone.

Agents in the inner Brisbane suburbs report units are letting much more quickly, with young professionals in particular willing to pay higher rents for inner city living and modern accommodation.

Vacancies are currently taking one to two weeks to relet in the inner suburbs while other parts of Brisbane are taking a fraction longer, according to property managers at REIQ accredited agencies. On average, listings are receiving two to five applicants across the LGA.

Source: REIQ Press Release

High Rises

In a post below, I mention that the May edition of Australian Property Investor had a good story about the oversupply of inner city Melbourne high rise, titled "High on High-rises" (page 86, May 2011 edition). Some quotes about the Melbourne apartment market:

• "What we have sitting out there is a potential tsunami of apartments. They're all high-rises and a lot of them are aimed at the investor market."
• "They're missing the point altogether, building high-rises and thinking this will solve the housing dilemma. These places have poor facilities, with a lack of shops and where people don't get a chance to mix in a community."
• "High-rise apartments are largely marketed to investors because developers are under pressure to sell a certain percentage off the plan before they can build. You're buying brand new, so obviously paying a premium for the 'wow' appeal."
• "The majority of this construction will also be relatively small one and two-bedroom apartments aimed at investors, and 50 to 70% populated by students. The initial vacancy rate is likely to be high, taking significant time to absorb the necessary demand."
• The Age recently reported 88% of the 4,155 apartment sales in the first half of 2010 were in investment focused buildings.
• "My concern is that with a high-rise there are so many of them and they're all the same. There's no point of difference."
• "Because so many come on the market at once, they get let very quickly to anybody that comes along. Before you know it they look like slums."
• "Investors should try and buy two-bedroom properties [rather than one-bedrooms] if they can afford it."
• "In a high-rise, you're buying a carbon copy of 100 or 200 other units. Your until will be completely dictated by what the last unit sold for."
• "Poor property struggles in the market for years."

Rents in 2010

• 2009 weak year for rent growth
• Still down in 2010
• But will rise within months

RENTS across Australia stagnated and in some cases even fell in the December quarter, but are expected to rise later this year.

A report to be released by Australian Property Monitors today says last year was the weakest for national rental growth since 2002.

While APM flags a strong lift in rents is likely this year, property managers and landlords reported that the market had remained soft so far this month, which is typically the busiest month for the rental market.

Chris Rolls, managing director of the Gold Coast and Brisbane residential property manager Rental Express, said: "We have found this is the slowest start to the year for the last five years."

Mr Rolls, who owns a four-bedroom rental property in Brisbane suburb Kelvin Grove, said the contract for the property came up for renewal in 10 days and he had opted to keep the rent at $520 a week in the hope that the current tenants would not leave.

"The risk is that if you increase the rent, and they don't pay it and instead move out, I won't get the same rent. It was top rent 12 months ago," Mr Rolls said.

Source: The Australian

Harcourts New Farm owner and property manager Kylie Pridham agreed the tenant's reprieve - brought about by the global financial crisis - would not last long, with vacancy rates in Brisbane to remain about three per cent.

"We have had to reduce [the rent] on some properties by $50 a week, but that won't last," Ms Pridham told theAustralian Financial Review.

"As soon as the lease finishes in six months time those rents will be back up."

Source: Brisbane Times

Interest in the sale may be strong but the general property outlook for the year is a little more sobering, according to property analyst Michael Matusik. Mr Matusik warned that property was likely to be oversupplied this year. He cited factors including a shrinking average household size, less impact than expected from overseas migration and lots of empty houses around the country.

Mr Matusik said that after decades of overconsuming property, the past year had seen a more frugal mindset which could continue.

And he said the rental market was not as tight as some commentators claimed. Rental analyst Louis Christopher of SQM research said claims of an imminent increase in rents were optimistic.

"There is no evidence to suggest we will see significant increases in rents," Mr Christopher said. "Despite recent aggressive forecasts, increases of between 3-5 per cent in most areas are more likely, depending on what you are renting and where," he said.

His calculations put Brisbane's vacancy rate at 3.4 per cent last month, with 8603 homes available for rent. This is up nearly half a per cent from the previous month.

Source: Courier Mail

Brisbane Vacancy Rate

Vacancy rate for all Brisbane properties (houses and apartments, anywhere in Brisbane) is a low 1.9%

SQM has a good website to look at rental vacancy rates:
Brisbane City (4000 postcode) - 1.7%
South Brisbane area (4101) - 1.6%
Toowong (4066) - 1.4%
St Lucia (4067) - 1.5%
Indooroopilly (4068) - 1.9%
Sherwood area (4075) - 2.6%
Hamilton (4007) - 4.4%
Noosa (4567) - 2.2%
Mooloolaba (4557) - 1.3%

See also story in Courier Mail

"INNER Brisbane rents are increasing at more than 10 per cent a year, with a downturn in new apartments expected to keep vacancies tight.

DTZ Research has shown the biggest growth has been in one-bedroom units in the inner south and inner west suburbs of South Brisbane, West End and Indooroopilly, where rents have risen by up to 20 per cent.

The median rent of a one-bedroom unit in the inner south is now $420 a week, only $10 less than the CBD median price. DTZ director of project marketing Paul Barratt said the strongest growth in the next two years would be in near-city units and middle-ring suburbs with good transport."