Just 0.7% of Australian rental properties were available to prospective tenants last month – the smallest portion on record, according to Domain’s latest Vacancy Rates Report.
Renters in Adelaide and Perth are facing the most dire situations, with the vacancy rate in the two cities coming in at just 0.3%.
Those in Brisbane and Hobart are in a better position than they were this time last year, with 0.7% of rentals in the respective cities on the market in February – a 0.1% annual increase.
In Sydney and Melbourne, however, vacancy rates fell to 0.8% last month.
Fortunately, the “tipping point”, as predicted by Domain chief of research Nicola Powell via the Savings Tip Jar podcast, appears to be approaching.
“While the vacancy rate hits a record low, it's crucial to consider the bigger rental market picture,” she said on Monday.
“The number of prospective tenants per rental listing is easing, indicating falling competition between renters.
“This supports the trend of slowing rental growth, suggesting demand is pulling back. This could be an early indicator of an increase in vacancy rates sometime this year.”
Dr Powell noted an uptick of first home buyers purchasing property, perhaps in a bid to exit the rental pool, which could also help ease strain on the market.
Almost 10,000 first time buyers committed to a home loan in December – around 13% more than did in the same month of 2022, Australian Bureau of Statistics (ABS) data reveals.
That uptick could be accelerated by new and enhanced first home buyer incentives, such as the Help to Buy scheme and Queensland’s recently doubled first home buyer grant.
Not to mention, the prospect of interest rate cuts later this year.
First home buyer warning: Don’t let FOMO drive purchasing decisions
However, James Chase Buyer’s Advocacy founder George Cherchian has warned first home buyers not to let fear of missing out push them into entering the property market unprepared.
“First time buyers are taking matters into their own hands and deciding not to wait any longer,” he told Savings.com.au.
Expectations that now is the perfect time to buy, largely due to the belief the Reserve Bank of Australia (RBA) could cut rates in the near future, has “reignited FOMO with a vengeance”, he said.
“[That is] pushing buyers towards even the most neglected properties. As a result, we’re seeing properties in really bad shape going for prices that would have been unthinkable just a year ago.”
That’s even more so the case in cities such as Sydney, Brisbane, and Melbourne, the expert notes.
Part of the increased market interest might be due to waning construction costs, following a surge during the pandemic.
The rebalance might have made the prospect of renovating “more palatable” for buyers, Mr Cherchian said.
Though, he warns buyers to be aware of the pitfalls that can come from purchasing a project.
"While the initial lower purchase price of a 'fixer-upper' might seem attractive, the reality of renovation can often be a rude awakening.
“Costs can escalate quickly, and there are always unforeseen challenges that can turn what seemed like a good deal into a financial burden.
“The best investment decisions are made with a clear understanding of the risks and opportunities involved. Don't just jump in because of FOMO.”
More first home buyers are also showing interest in asset classes they mightn’t otherwise have considered.
“We're seeing a lot of first time buyers considering apartments and units over their initial preference of a house,” Mr Cherchian told Savings.com.au.
“They're taking action, they're getting their foot on the property ladder.
“It's good to see people being more open minded, flexible, [and willing to] take one step back in order to take two steps forward.”
Image by Steven Ungermann on Unsplash
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