Inner Brisbane vacancy rate jumps to 4 percent: REIQ

The inner Brisbane market has reported a sharp rise in rental vacancies, a lift from 2.1 per cent to 4.0 per cent in the December quarter.

But while this may seem a big jump, it’s actually not unusual for this market in the December quarter, the REIQ suggest.

"The 0-5km ring empties of renters in the Christmas/early January period and vacancies rise," said the REIQ chief Antonia Mercorella.

There has been an almost-decade long pattern of higher vacancies in December followed by a fall in the March quarter as the market returns to business as usual.

There was also a fall in the June and September quarters last year too in the inner city.

Brisbane’s middle ring (5-20km) held rock steady at 2.0 per cent from September to the December quarter. This closes out a very stable year for this region. In December 2017 the middle ring was 2.1 per cent, before it bumped up to 2.8 per cent in the March quarter. The June and September quarters were 2.1 per cent and 2.0 per cent respectively. The market forces of supply and demand are well balanced in this section of the market.

Brisbane LGA eased by 0.5 per cent, moving from a tight 2.0 per cent closer to a healthy ranking of 2.5 per cent. For most of 2017 this market averaged around 3.0 per cent to 3.5 per cent. Throughout 2018 it tightened a little as the more affordable middle ring lured tenants away from the central suburbs. But as supply to the inner city apartment market slows, it’s possible we’ll start to see this market tighten again over the coming year.

The Greater Brisbane region tightened from 2.4 per cent to 2.3 per cent.

A combination of factors is triggering investor nervousness in the Queensland rental market as the REIQ is seeing a slowdown in investor activity.

"Local agents in pockets of the southeast corner are reporting falling sales volumes, attributable to the perfect storm of real estate headwinds of tightened lending criteria, the legislation review, and the pending federal election," said Antonia Mercorella.

"As federal election campaigning begins to ramp up uncertainty around potential negative gearing adjustments and capital gains tax changes have caused many investors to hit pause on possible buying activity.

"The REIQ is hearing from agents that financing is causing contracts to fall over.

"We’re seeing tightened lending restrictions slowing both investors and first home buyers from getting into the market.

"The State Government’s ongoing review of the Residential Tenancies and Rooming Accommodation Act is adding to the unease, particularly given the types of changes introduced in Victoria following a similar review of its rental legislation.

"Investors are concerned about a loss of control over their asset and worry about unwieldy legislation that will reduce their rights while ramping up concessions to tenants," she said.

Outer Brisbane (Ipswich, Logan, Moreton Bay and Redland) tightened from 2.8 per cent to 2.0 per cent, moving from healthy to tight. This market is being dragged into tight territory by the Redlands, which fell from 4.8 per cent to 1.6 per cent.

Ipswich tightened from 2.4 per cent to 1.8 per cent. Local agents report some jitters from investors who are nervous about the ongoing State Government review of the Residential Tenancies and Rooming Accommodation Act. The population grew from 166,904 in 2011 to 193,733 – a gain of 26,829. This will add to the strain on rental accommodation.

Logan tightened from 3.5 per cent to 2. 4 per cent. This market has moved from healthy into tight and, similar to Ipswich, is partially feeling the impact of population growth. From 2011 to 2016, the population of Logan grew by more than 25,000, or the equivalent of more than 5,000 people a year. With many regions reporting muted investor activity this population growth will push vacancy rates lower.

Moreton Bay held steady at 2.0 per cent, the same as the September quarter. Home to North Lakes, one of the fastest growing SA2s in Queensland, according to ABS data, a stable vacancy rate of 2.0 per cent is noteworthy and indicates a region where supply and demand are well balanced. 

The Gold Coast's December quarter vacancy rate saw a jump in the vacancy rate from 1.7 per cent to 4.8 per cent.

Several projects have been completed and added to the rental pool.

The largest of these is JLL’s Smith Collective build-to-rent dwellings.

The precinct has around 1251 dwellings, with first tenants moving in last month.   

Other developments have come online in Varsity, Broadbeach, Miami, Burleigh and Robina.

Agents are indicating that the market is price sensitive and tenants have choice, conditions that are relatively new to this market.

The REIQ signalled the third stand-out result for the December quarter was the Redlands, which tightened from 4.8 per cent to 1.6 per cent.

"This result represents a return to business as usual for this region which historically reports around 2 per cent vacancies," 

"The September result of 4.8 per cent was an outlier."

Local agents report that there has been noticeably less activity in the December/January period than usual.

Tenants are staying put, one property manager reported, summarising the general consensus on Redlands.

The Sunshine Coast SD (Sunshine Coast LGA and Noosa Shire combined) has tightened and is now firmly classified a tight rental market.

The vacancy rate has dropped from 2.4 per cent to 1.8 per cent. These tightened conditions will continue to exert upward pressure on prices and it is likely we will see some movement in rents if these conditions continue.