Renters spoilt for choice in Sydney and Melbourne as vacancy rates surge

author-avatar By on December 02, 2020
Renters spoilt for choice in Sydney and Melbourne as vacancy rates surge

Rental vacancy rates continued to climb in Sydney and Melbourne in November, presenting an opportunity for renters to negotiate and save on rent.

Domain rental vacancy rate data released on Wednesday shows vacancy rates are the highest in apartment-heavy inner Melbourne and Sydney, with vacancy rates as high as 14.4% in Melbourne City.

Melbourne's overall vacancy rate rose to 4.8% in November, from 4.7% a month earlier. This marks the highest rental vacancy rate in the country and comes after the city emerged from the toughest COVID-19 lockdowns in Australia.

Sydney's overall vacancy rate rose to 3.4% in November from 3.3% the month before, while Brisbane's rental vacancy rate fell slightly to 1.9%. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

Domain's Senior Research Analyst Dr Nicola Powell said the inner-city areas of Melbourne, Sydney, Brisbane and Adelaide continue to be rental weak points. 

"These are areas that have a high level of overseas migration and student population, with a significant proportion of the rental demand sourced from overseas," Dr Powell said. 

"These are also areas that have a greater exposure to the industries most vulnerable to the job losses associated with the pandemic."

Renters in Sydney are spoilt for choice, with an estimated 21,800 vacant rental listings at the end of November – up 3.9% from October.

In Melbourne, over 27,000 rentals became available by the end of November, despite the complete elimination of COVID and a significant reopening of the Victorian economy over November. 

See also: Now that it's a renters market, should you take advantage and find a new rental?

"The effects of the pandemic have decimated Melbourne’s inner city market," Dr Powell said.

"The number of vacant rentals soared in Melbourne during stage four lockdowns and continued to rise as restrictions began to ease.

"The more substantial lift in vacant Sydney rentals is likely due to the seasonal influence as the rental market edges closer to the typical tenant changeover period. This seasonal effect may not be as pronounced in Melbourne given the recent COVID-19-induced rental hiatus."

The sharpest rise in vacant rental listings came from inner-city Melbourne, including the regions of Stonnington – West, Whitehorse – West, Boroondara, Brunswick – Coburg and Port Phillip. 

Capital city rental vacancy rates – November 2020

Nov-20 Oct-20 Nov-19 Monthly change Annual change
Sydney 3.4% 3.3% 2.9%
Melbourne 4.8% 4.7% 1.8%
Brisbane 1.9% 2.0% 2.3%
Perth 0.8% 0.8% 2.2%
Adelaide 0.8% 0.7% 1.0%
Hobart 0.5% 0.6% 0.5%
Canberra 0.7% 0.9% 1.3%
Darwin 0.9% 0.7% 4.8%
National  2.1%  2.1% 1.9%

In other parts of the nation, it's a different story altogether.

Hobart and parts of South Australia have some of the lowest vacancy rates in the country as people flee the capital cities.

"The pandemic has brought upon an abundance of demand for people seeking greater space and laidback lifestyle, as working from home becomes more accepted in our workplaces," Ms Powell said.

"This is likely to place rental demand across lifestyle regions close to the water, tree-change regional areas and on the outskirts of the capital cities."

Hobart's overall vacancy rate fell to 0.5% with some parts of the city recording vacancy rates as low as 0.1%. 

If you're looking for a rental in South Australia's Marion and Tea Tree Gully you won't have much to choose from, with a vacancy rate of just 0.2%.

Renting nearly impossible for those on JobSeeker

Despite rental affordability looking good overall in some cities, for Australia's poorest it's a different story. 

While the JobSeeker supplement has slightly improved rental affordability for Newstart households, recipients are still facing moderate to extreme rental stress nationwide, according to the Rental Affordability Index (RAI) released yesterday

Despite rents falling and vacancies rising, the index found rental affordability has worsened for about 755,000 new JobSeeker recipients who are spending between 42% to 69% of their incomes on rent in every capital city.

According to the research, a single person on JobSeeker could not afford to rent in a single place across the whole country. 

“As the Victorian Government has now done, there is a massive need for government investment in social and affordable housing – and now is the time for it since borrowing costs are so low in Australia, National Shelter Executive Officer Adrian Pisarski said. 

"Without investment in this space, we are ignoring our responsibility to help people be decently housed."


Photo by Soheb Zaidi on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's passionate about empowering people to make smart financial decisions and improve the financial literacy of Australians by translating complex finance topics into understandable, relatable content.

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