Renters flocked to the middle ring, while supply in inner Brisbane exceeded demand, pushing the vacancy rate to 4 per cent, according to REIQ December quarter rental data released today.
Inner Brisbane (0-5km ring) vacancies lifted from 3.7 per cent in September last year to 4 per cent in the December quarter, while the middle ring sharply tightened from 3.4 per cent to 2.1 per cent.
The vacancy rate of inner Brisbane has only reached 4 per cent or higher twice before – December 2013 when it reached 4.1 per cent and March 2017 when it peaked at 4.4 per cent, the highest level since records began in 2008.
REIQ CEO Antonia Mercorella said this news was disappointing for investors, but not unexpected.
“We knew vacancies in inner Brisbane would edge up for the duration of 2017 thanks to strong levels of apartment supply coming to the market.
“Approvals have fallen in the past six months and we know that this period - where supply exceeds demand - is likely to be only temporary thanks to a steadily growing population and consistent demand for inner city accommodation,” she said.
“Just how temporary is difficult to predict but our expectation is that demand will start to catch up to supply very quickly and vacancy rates will return to the typically healthy levels this market usually achieves of around 2.5 – 3.5 per cent.”
[See the vacancy rate table in full, here]
The middle ring (5-20km) is popular with the vacancy rate tightening from 3.4 per cent to 2.1 per cent in December 2017.
“This market has become very popular. It’s affordable, in most suburbs there is the convenience of good infrastructure and public transport and tenants have a good range of options to suit many budgets,” Ms Mercorella said.
The Outer Brisbane markets of Ipswich, Caboolture, Pine Rivers and Redland eased slightly but are still classed as healthy rental markets. Logan and Redcliffe tightened.
Queensland’s southeast corner beach front markets of the Gold Coast, the Sunshine Coast, as well as the Fraser Coast, all tightened and are now among the tightest rental markets in the state.
“Caloundra and Maroochydore have vacancies of just 0.4 per cent, the lowest rate ever recorded, and this means that tenants are going to struggle significantly to get a rental property,” Ms Mercorella said.
“Markets that remain consistently tight will eventually see upward pressure on rents,” she said. “It’s no surprise that the Gold Coast, which has officially been classed as a tight market for the better part of the past five years, is the most expensive place in Queensland to rent a three-bedroom house or a two-bedroom unit.”
2017 is the year of the regional recovery with a group of regional markets outside of southeast Queensland moving from the weak (in some cases very weak) range into healthy territory, or very close to healthy.
In early 2017, Toowoomba was the only regional rental market (excluding the Gold and Sunshine coasts and Cairns, which were all tight markets) to operate in the healthy range. By December 2017 the rental markets of Bundaberg and Mackay exited the weak range.
And even though Rockhampton and Townsville remain weak, they have made significant moves toward healthy status. Rockhampton vacancies were at 8.6 per cent in March 2017 but by December had improved considerably to reach 5 per cent. Townsville has shown similar improvements, tightening from 6.2 per cent in March 2017 to fall to 4.6 per cent in December.
“These rental markets were facing extremely difficult conditions however the improving broader economy, in particular the recovering coal price and strengthening employment figures, is having a positive impact on regional rental markets and this is good news,” Ms Mercorella said.
Fraser Coast started 2017 in weak territory with 3.9 per cent but by December reached the lowest level all year with 1.6 per cent. This is the lowest level reached since June 2008 (when the REIQ commenced calculating its vacancies).
Cairns, which has been a consistent rental market performer in recent years, reached its lowest vacancy level of 1.6 per cent for only the second time.
“As yesterday’s Deloitte Access Economics report shows, Queensland’s economic prospects are improving with Queensland the most popular destination for internal migration. Our population is steadily growing and people typically rent before they buy, testing out the area before they commit to a mortgage. We are confident that Queensland’s rental markets will perform steadily throughout 2018,” Ms Mercorella said.
The REIQ classifies the health of the rental market as follows:
0 - 2.5% = tight
2.5% - 3.5% = healthy
3.6% - plus = weak
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