The Gold Coast has stolen the spotlight for the December quarter vacancy rate report, with a jump in the vacancy rate from 1.7 per cent to 4.8 per cent.
Several projects have 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 inner Brisbane market also reported a rise in vacancies, a lift from 2.1 per cent to 4.0 per cent in the December quarter. While this may seem a big jump, it’s actually not unusual for this market in the December quarter. The 0-5km ring empties of renters in the Christmas/early January period and vacancies rise. This is 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.
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.
Rental conditions remain steady for December
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.
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 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.
Toowoomba: The City of Flowers has tightened by a fraction of a point to reach 1.8 per cent vacancy rate in December quarter 2018. This market has shown remarkable consistency throughout a broad range of conditions to remain one of the most steady regional performers over the medium term. Over the past five years, the market has varied only marginally, operating within a narrow range of 1.3 to 3.2 per cent, a variance of only 1.9 per cent.
Fraser Coast: The Fraser Coast market continues to show signs of strengthening with a tightening of the vacancy rate from 1.4 per cent in the September quarter to 1.2 per cent in the December quarter. The surrounding region is similarly improving. Hervey Bay has tightened to 1.0 per cent, making this the tightest rental market in the state. Maryborough has also tightened to 1.6 per cent, down point four of a percentage point from 2.0 per cent.
Bundaberg: The region’s jobs market is yielding improvements to the rental market with a further tightening, down to 2.0 per cent. This market has followed a steady downward trend from the March 2017 quarter result of 4.6 per cent. While the rental market has improved, the sales market is holding steady, with the annual median sale price remaining static for the past 12 months. It is our expectation that the sales market will likely show signs of improvement, if the job market is secure with workers able to secure finance for housing purchases.
Gladstone: This market did ease fractionally, by 0.1 of a point, moving from 4.1 per cent to 4.2 per cent. However, this market has demonstrated stability and steadiness and while it would be desirable to see that vacancy rate fall further, it has improved considerably from 2017, when this market hovered stubbornly at 5 and 6 per cent. Local agents report that confidence is returning to the local economy and we are optimistic that this market has turned a corner. We hope to see improvements in the sales market soon.
Mackay: The Mackay market has roared back and is firmly in recovery with employment driving the rebounding rental and sales market. The vacancy rate has eased, moving from 0.9 per cent to 1.7 per cent. It remains a tight market.
Rockhampton: The Rockhampton rental market continues to tighten. This market moved from 2.3 per cent in September to 2.0 per cent in the December quarter. We are encouraged that this market is improving in a consistent manner. It has been steadily tightening from a very weak 8.6 per cent in March 2017 to a tight 2.0 per cent in December 2018.
Townsville: The December quarter vacancy rate eased to 4.3 per cent. In January this market suffered devastating floods and this will impact the rental sector for some time to come. With an unknown proportion of the rental market impacted by the floods, and the number of displaced people needing immediate short-term accommodation also unknown, it’s difficult to measure the impact of this event on the market.
To date, we have not received any evidence of widespread rent gouging, despite some tabloid media reports to the contrary.
Cairns: While remaining a tight market, the Cairns market eased fractionally from 1.4 per cent to 1.7 per cent. This market still offers some of the best yields for investors, at around 5 per cent.
Headwinds Affecting the Queensland Rental Market:
A combination of factors is triggering investor nervousness in the Queensland rental market and we are 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.
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.
Stats At A Glance:
• Tightest Vacancy Rate: 1.0% (Hervey Bay)
• Weakest Vacancy Rate: 5.9% (Cassowary Coast)
• Biggest fall: -3.2% (Redlands, 4.8% in Sep Qtr to 1.6% in Dec Qtr)
• Biggest rise: +3.1% (Gold Coast, 1.7% in Sep Qtr to 4.8% in Dec Qtr)
REIQ Media and Communications Manager
T: 0408 020 428 E: email@example.com