Australia’s rental market is booming, with rental rates surging across the country as tight supply and record-low vacancy rates push competition for rental properties to a crisis point.
At the same time, record levels of internal migration to locations such as Brisbane and Greater Queensland have further exacerbated the supply-demand imbalance in many areas.
New data from SQM research just last month revealed that the Australian rental crisis has reached unprecedented levels with national residential property rental vacancy rates falling below 1% for the first time since 2006, to 0.9% in August 2022.
The total number of rental vacancies Australia-wide now stands at 32,948 residential properties, which was sharply down from 36,741 in July.
Sydney and Melbourne vacancy rates fell to 1.3% and 1.4% from 1.5% and 1.6% respectively.
In the smaller capital cities, Perth, Adelaide, Canberra, Darwin, and Hobart, vacancy rates sat well below 1.0% and all with the exception of Darwin recorded falls in vacancies over August.
But not every suburb across the country is following the same trend.
The suburbs where competition isn’t so fierce
Recent PropTrack data reveals that there are some suburbs in our capital cities where renters might find it less competitive.
While many areas are struggling under the sheer weight of demand for rental properties, PropTrack has been able to identify the areas where there are fewer renters versus available properties.
To examine where there is the least competition for rentals, the data looks at capital city suburbs with the fewest potential renters per listing relative to the national median over the past year.
And this is what it found.
Canberra City ranks in the first place, with 79% fewer potential renters per listing than a typical Australian suburb.
Lakemba in Sydney’s Inner South West ranks in second place with 76% fewer potential renters per listing, followed by Barton and Kingston, both located in the ACT, and both with 73% fewer potential renters per rental property listed.
In fact, the ACT and NSW dominate the list, with 4 out of the top 10 each - the remaining two suburbs are both located in Victoria.
“Although the rising share of investor lending is a sign that rental stock may increase, the effects of this will not be immediate,” Megan Lieu, economic analyst at REA Group, said.
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“At the same time, demand is also likely to remain elevated as people moving back to cities compete with returning international students.
“That means many markets will remain competitive and rents are likely to continue rising.”
How much renters can expect to pay
Over the 30 days to 13 September 2022, the capital city asking rents rose by another 2.6% with the 12-month rise standing at 20.1%, according to SQM research.
Meanwhile broader national rents, taking into account all regions, rose by 14.7% for the same 12-month period.
The national median weekly asking rent for a dwelling is recorded at $525 a week.
Sydney recorded the highest weekly rent for a house at $845 a week.
While Adelaide units offer the best rental affordability of all capital cities at $376 a week.
So, what does this mean for investors?
Rental values and demand are just one thing to consider when it comes to settling on your investment property, the property value itself and its resale value also needs to be considered.
That said, this list of suburbs with low demand for rentals may make an interesting read, but they aren’t areas we would actively encourage or discourage investment.
After all, the objective for property investors is to find investment-grade properties in investment-grade suburbs, regardless of the latest hotspot data.
That’s areas and properties which hold their value over the long term, rather than benefit from an uptick in demand.
But even before looking for the right location, make sure you have a Strategic Property Plan to steer you through the upcoming challenging times our property markets will encounter.
Because aside from remembering that you should focus your efforts on investment-grade properties and locations, you also need to remember that property investing is a process, not an event.
That means that things have to be done in the right order – and selecting the location and the right property in that location comes right at the end of the process.
And that’s because what makes a great investment property for me, is not likely to be the same as what would suit your investment needs.
