Melbourne’s empty rentals soar by 20 percent in one month!
Residential rents could fall 30%!
The number of vacant rentals in Melbourne has skyrocketed.
These are all headlines I read in the last couple of days and I can understand why they would scare the pants off many property investors.
But before you get too scared, like many other property predictions that have been made during this pandemic, you've got to take them with a grain of salt.
Will rents for every property in Australia drop 30%?
Or will it only be certain types of property such as CBD apartments in high-rise towers?
Will rents for houses drop as much as rent for apartments?
Now the comments I read were made based on data from Domain which showed the flood of properties entering the Melbourne rental market caused a spike in empty listings of 20 percent last month.
Domain report that Melbourne’s vacancy rate, which represents the portion of available, empty rental properties relative to the total stock of rental property, hit 3.8 percent in August – a significant increase compared to its 1.6 percent vacancy rate in August 2019
Domain senior research analyst Dr. Nicola Powell said the stage four lockdown, which banned all in-person property inspections, made searching for and moving to a rental challenging.
Interestingly, at Metropole Property Management, we have leased 24 properties since the lockdowns in Melbourne thanks to modern technology, virtual tours and proactive management.
Vacancy rates for houses are falling.
Dr. Andrew Wilson from MyHousingMarket reports similar rises in vacancy rates for Melbourne and Sydney.
When you break his figures down further you will see that vacancy rates for apartments are at record highs, and not surprisingly, vacancies in the inner city and near CBD suburbs are the worst.
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However as you can see from the following table, vacancy rates for houses in our two big cities are very low.
In fact when vacancy rate fall below 2%, as we are experiencing in a number of our capital cities, this usually lead to higher rentals.
So what's ahead?
As with everything in property, there is not one Australian rental market, nor even one Sydney or Melbourne rental market, and therefore looking at overall vacancy rates are meaningless.
And as usual the supply to demand ratio will determine the direction of rentals.
It is hard to see all those vacant CBD and near city apartments, particularly those in Sydney and Melbourne, finding tenants any time soon.
So it is likely vacancy rates in that segment of the property market will keep rising until we get overseas students, local tourists and international tourists back into Airbnb properties and rents will keep falling.
On the other hand the demand for rental accomodation in well located houses, townhouses and villa units, as well as low rise apartments in our capital city middle ring suburbs should slowly return as we move out of our coronavirus cocoon and the economy picks up.
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on
If you're wondering what will happen to property in 2020–2021 you are not alone.
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