CBD Vacancy Rates Rising at Rapid Rate

Vacancy rates are rising in CBD areas across Australia
Photo: OSX

Figures released by SQM Research this week have revealed that the number of residential vacancies has stabilised nationally, coming back down to pre-Christmas figures after a seasonal spike during December.

However, when comparing the national vacancy rate for January 2014 (2.2 per cent) to the corresponding period of the previous year (January 2013), it can be seen that vacancies have lifted by 0.3 per cent year-on-year, with SQM Research’s vacancy rate data also revealing a strong increase in CBD localities.   

For a year that has already begun to show significant signs of promise in the sales market, this result is to be expected on the rental front, with prospective buyers leaving the rental market to purchase their own properties, resulting in an elevation of vacancies.

“Sydney was the outperformer of the capital cities over the year with a 2.1 per cent increase in asking rents for houses…”

That being said, as has been mentioned by SQM Research in recent months, each capital city is telling its own story where rental vacancies are concerned.

On one hand, Perth increased by 1.1 percentage points, Brisbane increased by 0.6 percentage points and Canberra increased by 0.5 percentage points (all on a yearly basis).

On the other hand, Hobart decreased by 0.4 percentage points during the same period and other capital cities such as Melbourne, Sydney, Darwin and Adelaide remained within close range of their 2013 figure.

Asking Rents Index

SQM Research’s Asking Rents Index revealed that asking prices for rental properties recorded a mixed story when compared to this time last year, with the capital city average recording a -0.7 per cent decrease in asking rents for houses and a 1.7 per cent increase in asking rents for units.

Sydney was the outperformer of the capital cities over the year with a 2.1 per cent increase in asking rents for houses and a 3.9 per cent increase in asking rents for units.

Canberra, however, recorded the steepest declines with an -10.3 per cent decrease in asking rents for houses and a -6.5 per cent decrease in asking rents for units.

“I would like to make a note of warning for CBD locations in Brisbane, Perth and Melbourne, where vacancy rates are rising at a very rapid rate.”

A capital city break down is available on the SQM Research website.
 
On a month to month basis, vacancy rates can be quite volatile and are often moved around by seasonal patterns. That is why consideration of the annual change is critical in the overall market assessment.

And on that note, vacancy rates continue their slow rise. Nevertheless, the rise is enough to now see a flattening of weekly rents for many locations as illustrated in our Asking Rents series.

I would also like to make a note of warning for CBD locations in Brisbane, Perth and Melbourne, where vacancy rates are rising at a very rapid rate. Those who are considering investing in the CBDs of these three cities should be strongly aware of this fact.
 
SQM’s calculations of vacancies are based on online rental listings that have been advertised for three weeks or more compared to the total number of established rental properties.

SQM considers this to be a superior methodology compared to using a potentially incomplete sample of agency surveys or merely relying on raw online listings advertised.
 
Please go to our methodology page for more information on how SQM’s vacancies are compiled.