Melbourne's rental vacancy rate surged 20% in August: Domain's Nicola Powell

EXPERT OBSERVER

The national vacancy rate held steady for the third consecutive month, remaining at 2.1 per cent and below the April peak of 2.6 per cent.

A two-speed vacancy rate has emerged as Melbourne entered its first month of heightened stage four restrictions in early August. Elsewhere, other capitals have avoided secondary lockdowns despite minor outbreaks occurring.

Melbourne’s stricter stage four lockdown has disrupted the rental market, with estimated vacant rental listings surging by 20.6 per cent over the month, and a staggering 140.7 per cent higher compared to last year.

In all other capital cities, vacant rental listings continue to see a downward trend in vacant rentals since the April peak.

Vacancy rates across the capitals continued to decline for the fourth consecutive month, except Melbourne, Sydney and Adelaide.

Melbourne has seen a steady rise since April, overtaking Sydney for the first time in the Domain’s vacancy rate series to become Australia’s highest vacancy rate market. Also, vacancy rates in Adelaide and Sydney remained stable over the month but are lower than the April peak.

Sydney’s vacancy rate held steady at 3.5 per cent, now the second highest of all capital cities. This is 50 basis points higher than one year ago. There were an estimated 21,828 vacant rental listings at the end of August, a fall of 0.5 per cent from the previous month.

In Melbourne, vacancy rates surged in August, increasing 60 basis points to 3.8 per cent, the highest rate ever recorded in the Domain vacancy rate series and 220 basis points higher than last year.

This was due to a 20.6 per cent rise in estimated vacancies, with 21,509 rentals sitting vacant by the end of the month. The elevated vacancy rate will continue to put downward pressure on rents in the months to follow.

In Brisbane, the vacancy rate declined 10 basis points to 2.2 per cent. There were an estimated 6679 vacant rental listings at the end of August, a fall of 240 over the month. Year-on-year the vacancy rate remains steady.

Conditions have tightened for Hobart tenants, with the vacancy rate now returning to pre-pandemic levels of March, contracting 10 basis points to 0.6 per cent. This makes Hobart the tightest capital city rental market.

In a small rental market, this represents 28 fewer vacant rentals by the end of the month. Over the year, Hobart’s vacancy rate is still 20 basis points higher than than the extraordinarily tight 0.4 per cent.

In Perth, the vacancy rate has continued its long-term downward trend despite the COVID-19 pandemic shock in April, a sign Perth’s property market is recovering.

The vacancy rate continues to fall, contracting 30 basis points to 1 per cent, and is the lowest vacancy rate recorded in Perth since the inception of the Domain vacancy rate series. This is down from the peak of 5 per cent in June 2017 and down 170 basis points year on year.

The vacancy rate in Canberra continues to fall, declining 10 basis points to 1 per cent, to become the second tightest rental market across the capital cities. Over the year, Canberra is 10 basis points lower.

In Adelaide, the vacancy rate held steady at 0.9 per cent, 10 basis points higher than last year.

Darwin’s vacancy rate continues to see a sharp decline, falling 40 basis points to 1.3 per cent, 210 basis points lower than last year.

NICOLA POWELL is a Senior Research Analyst at Domain