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By Michael Yardney

Higher Vacancy Rates Won’t Ease the Rental Crisis for Tenants | Property Insiders [Video]

key takeaways

Key takeaways

The latest My Housing Rental Report showed that rental markets eased over June, with capital city vacancy rates for both houses and units generally rising.

Rents, however, continued their upward trajectory, providing no significant relief for tenants.

Dr Andrew Wilson also discusses the latest dwelling approval figures which show we are not building enough dwellings to cope with the demand, and there is no way we'll meet the government requirement of 1.2 million new dwellings in the next five years

We also discussed the latest auction results.

Last week we reported My Housing Market’s end-of-month figures, showing that property prices have continued rising around Australia—that’s 18 months in a row now.

This means that many first-home buyers are facing a heartbreaking battle, which is doubly difficult because rents have been skyrocketing.

Australia's population growth is fuelling rent increases. There are more working-age people in the country than ever before, and the housing supply-demand imbalance has never been greater.

The persistently low vacancy rate and still-rising rents have left tenants with little power to effectively navigate the rental market, particularly those on lower incomes.

In today’s Property Insider chat with Dr Andrew Wilson, we discuss the latest My Housing Market Rental Report – and while vacancy rates have risen a little bit, unfortunately, there is no relief in sight for tenants.

Still No Sustained Relief Likely for Tenants

Watch this week’s Property Insiders chat as Dr Andrew Wilson discusses the latest My Housing Rental Report.

The report showed that rental markets eased over June, with capital city vacancy rates for both houses and units generally rising.

Rents, however, continued their upward trajectory, providing no significant relief for tenants.

Median weekly asking rents for houses June 2024

A vacancy rate of around 2% is considered a balanced market where there is a sufficient supply of rental accommodation to satisfy tenants’ needs, and as you can see from the tables below, we are far from this situation at present, suggesting the rental crisis will continue for some time, with the minimal extra supply on the horizon there is no relief in sight.

There was a predictable easing in June rental demand, reflecting the impact of mid-year holidays.

However, rents generally continue to rise—particularly for houses, with still-low vacancy rates favouring landlords—and this is still bad news for tenants.

Median weekly asking rents fo units June 2024

Home Building Approvals Rise

Watch this week’s Property Insider video as Dr. Andrew Wilson discusses how home building approvals rose by 6.6% over May, following 1.4% April rise.

Home Building Approvals Trend

The volatile non-house (apartments/townhouses) drove the outcome, up 16.3% month on month, but importantly, this is still well down in annual terms at -31.7% year/year.

The less volatile detached house rose 2.1% m/m and is up 12.0% y/y. Importantly, combining non-house and detached, the annual trend is broadly flat at -1.0% y/y.

Home Building Unit Approvals Trend

The annual run rate of approvals is running at 163,700 dwellings. Outside of the most recent period, this is the weakest annual run rate since early 2013.

This level of building approvals falls well short of the government’s ambitious target of building 240,000 dwellings a year (1.2 million homes from July 2024 to June 2029), and continues to run well below population growth (15 years plus) of 635,000.

Of course, many of the approved drawings won’t come out of the ground for some time yet, and the industry is still impacted by capacity constraints. The latest monthly CPI indicator notes that:

For new dwelling construction costs, builders continuing to pass on higher costs for labour and materials.

Public sector construction has been blamed for hampering the dwelling sector (particularly apartment construction) by competing for resources in a capacity-constrained economy.

Capital City Annual Dwelling Building Approvals

More Strong Winter Auction Results to Begin July

July has commenced with more solid to strong winter auction results overall and again characterised by a continuing wave of mid-year auctions.

Adelaide had the strongest auction clearance rate of 79.7%.

Auction clearance results for the other capitals were:

  • Melbourne - 62.8
  • Sydney - 76.0%
  • Brisbane - 62.6%
  • Canberra - 69.5%

The national weekend auction market reported a clearance rate of 70.1% which was well ahead of the 64.5% reported over the previous weekend – but lower than the 75.0% recorded over the same weekend last year.

National auction numbers were lower again over the weekend with 1567 listings versus the previous weekends 1739, but again still significantly above the 1078 listed over the same weekend last year.

Weekend auction markets continue to report positive results for sellers, with activity levels stable despite the usual impact of the typically slower, school holiday-distracted mid-winter market.

Auction Results 6th July 2024

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.

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