VACANCIES TIGHTEN AS RENTAL DEMAND RISES

24 October 2018

The REIQ Residential Vacancy Rate report for the September quarter has revealed that increased rental demand of about 1.1 per cent for the past quarter and 3.7 per cent for the past year has been a key contributor to the general tightening of vacancies throughout the state.

Queensland’s annual population growth of 1.7 per cent or about 83,330 new residents, (for the year to March 2018) has helped absorb about 6200 net new rental properties over the September quarter and more than 21,120 net new rental properties for the past year. 
The numbers of residential bonds held by the RTA is increasing:

  • 588,039 bonds held by the RTA in the 12 months to September 2018
  • 581,833 bonds in the 12 months to June 2018
  • 566,914 bonds in the 12 months to September 2017 

Supply has also played a pivotal role in shaping the current state of the rental market. Tighter lending criteria and higher interest rates continue discouraging individual investors to enter the property market and limiting the increase in rental supply. This could potentially change if more new rental supply is released directly by developers into the rental market.

The Queensland rental market has strengthened again this quarter, reporting more tight markets and fewer weak markets compared to the previous quarter. In September 2018, Queensland reported 27 tight rental markets, four healthy markets and four weak markets compared to 24 tight markets, five healthy markets and seven weak markets for the June quarter. 

Mackay has become the tightest rental market in Queensland as vacancies tightened to 0.9 per cent over the September quarter. 

The Greater Brisbane rental market is tight, at 2.2 per cent. Within Greater Brisbane, Logan and Caboolture are the only markets that are in the healthy range, at 3.5 per cent and 2.8 per cent respectively.

The rental market in Brisbane LGA tightened for a second consecutive quarter, to 2.0 per cent in September. While property managers continue expressing concerns about oversupply of rental stock in the capital city, particularly for medium-to-high density dwellings, vacancies for both, inner Brisbane and Brisbane’s middle ring, have fallen to the tight range over the quarter. 

The coastal rental markets, with the exception of the Hinterland region in the Sunshine Coast, operated within the tight range with vacancies not exceeding 2.1 per cent. Sunshine Coast SD vacancies held steady at 2 per cent, with the sub-regions moving at different speeds, but all performing reasonably well, generally speaking.

The consistently solid rental markets of the Gold Coast and Cairns tightened slightly this quarter, reaching 1.7 per cent and 1.4 per cent respectively. 

The Fraser Coast and Cairns markets are the tightest coastal rental markets in Queensland with regional vacancies of 1.4 per cent.

Regional Queensland: The rental markets in the largest regional centres continued strengthening this quarter as median rents followed an upward trend, particularly in Gladstone, Mackay, Rockhampton and Toowoomba for the past year. 

Only two of the major regional markets in Queensland, Gladstone and Townsville, are weak markets, with vacancies above 3.5 per cent but below 4.5 per cent. In fact, for the first time in six years, the Rockhampton rental market moved into the tight range as vacancies tightened from 3 per cent in June to 2.3 per cent in September. 

Similar to the previous quarter, Cassowary Coast was the weakest rental market in Queensland with vacancies of 6.3 per cent.

The key findings for the Queensland rental market for the September 2018 quarter are as follows:

GREATER BRISBANE

  • Brisbane LGA rental market strengthened and performed better for investors over the quarter.
  • Vacancies tightened from 2.3 per cent in June 2018 to 2 per cent in September this year. 
  • Median rents for three-bedroom houses, two-bedroom units and three-bedroom townhouses each increased 2.4 per cent for the past year.
  • Anecdotal evidence from property managers reveals that good property location is critical to maintain low vacancies as tenants continue favouring proximity to the city, public transport and amenities. 

Greater Brisbane vacancies held steady at 2.2 per cent for the September quarter. 

  • Pine Rivers, in the Moreton Bay region, reported vacancies of 1.2 per cent over the September quarter, down from 1.4 per cent in June.
  • The local government area of Redland reported one of Greater Brisbane’s tightest vacancies of 1.5 per cent as weekly median rents for a number of dwellings generally held steady for the past year. 
  • Logan vacancies eased from 1.9 per cent in June to 3.5 per cent in September as the market has seen an increase in new rental supply being released to the market.
  • The rental markets in Ipswich and Moreton Bay continued operating within the tight range as tenants favour well-priced rentals in proximity to public transport.

COASTAL MARKETS

  • The Gold Coast rental market has proven resilient to the increase of new rental stock and the fall in demand following the completion of the Commonwealth Games. As such, vacancies tightened, from 2 per cent in June to 1.7 per cent in September.
  • Gold Coast property managers generally qualify the rental market as stable. 
  • Median rents for all dwelling types except one-bed units have trended upwards for the past year.
  • The upcoming release of the Commonwealth Athletes Village to the rental market will add about 1200 apartments, or 1.6 per cent additional stock, to the market. This will likely help a little to ease the tight market conditions. 

Vacancies in the Sunshine Coast SD rental market held steady at 2 per cent for the September quarter. The rental markets of Noosa and Caloundra Coast were the tightest markets in the region with vacancies of 1.8 per cent.

  • Median rents for three-bedroom houses, two-bedroom units and three-bedroom townhouses have generally trended upwards in the Sunshine Coast local government area and Noosa Shire for the past year. The main exception was the rental market for three-bedroom townhouses in Noosa which has seen large rent drops as demand has stabilised.
  • Anecdotal evidence from property managers reveals Sunshine Coast investors are more motivated to dispose of the property investment as they have expressed concerns about the impact of the renting reform and the potential change on property tax concessions in light of the federal election next year.

Vacancies in the Fraser Coast eased from 0.8 per cent in June to 1.4 per cent in September, still operating within the tight range.

  • Steady rents are boosting the rental market as well-priced rental properties find a tenant in less than a week, on average.
  • According to local property managers, the house rental market is in high demand, attracting higher demand from tenants and supporting the low level of regional vacancies.

Cairns vacancies tightened for a second consecutive quarter to 1.4 per cent in September, remaining within the tight range since December 2015.

  • Anecdotal evidence from local property managers reveals high demand for rental stock below $400 a week, while rental stock asking for a weekly rent above $400 generally sits vacant for longer.
  • Local agents have also expressed concerns about the lack of rental properties in the Northern Beaches of Cairns due to tight lending criteria discouraging property investors.

 

REGIONAL MARKETS
The Mackay rental market continued going strength from strength, becoming the tightest rental market in Queensland over the September quarter. 

  • Mackay vacancies tightened 100 basis points for the past three months, from 1.9 per cent in June 2018 to 0.9 per cent in September 2018.
  • Mackay rents generally increased in the range of 10 to 20 per cent for the past year, with two-bedroom houses and three-bedroom units reporting an annual increase in the weekly median rent of $50.
  • The strength of the regional economy and the employment market are driving the increase in demand for rentals. A stronger economy and renewed business activity have created about 3900 new job opportunities in Mackay SA4 for the year to August 2018, putting downward pressure on the jobless rate to 3.3 per cent.

Toowoomba remains a solid rental market with vacancies holding within the tight range for a third consecutive quarter.

  • The rental market in Toowoomba experienced an influx of rental stock for the past few years. However, the current tight vacancies demonstrate that demand is now catching up with supply.
  • Median rents for three-bedroom houses and three-bedroom townhouses increased in the range of 3 to 7 per cent for the past year; supporting an increase in demand.

Bundaberg vacancies held steady at 2.2 per cent for the September quarter as median rents, particularly for houses, have generally followed an upward trend for the past year.

Rockhampton delivered very good news for investors this quarter as vacancies fell within the tight range for the first time in six years.

Specifically, the Rocky rental market was able to absorb more than 300 net new rental properties for the past year and still deliver growth in the median rent for some type of dwellings over the past year.

Townsville vacancies tightened slightly from 4 per cent in June to 3.9 per cent in September.

  • Median rents for houses and townhouses trended upwards for the past year. However, median rents for one-bedroom and two-bedroom units remained subdued compared to 12 months ago
  • The downward trend on median rents for some dwelling types is partially explained by the large volume of National Rental Affordability Scheme (NRAS) properties released to the market about six to eight years ago.


Gladstone vacancies tightened slightly from 4.2 per cent in June to 4.1 per cent in September. While vacancies remain weak, the rental market is showing signs of improvement. 

  • Median rents for all type of dwellings have trended upwards for the past year. Median rents for three-bedroom and four-bedroom houses increased $30 a week over the past year. 
  • On a percentage basis, the median rent for one-bedroom units increased the largest percentage of 13 per cent for the past year.
  • Regional consumer sentiment is definitely on the mend due to a gradual economic recovery and a larger pipeline of private-sector investment. 

Whitsunday vacancies of 3.2 per cent remained operating within the healthy range for a third consecutive quarter.

  • Median rents for different type of dwellings are trending downwards as renovated rental stock post-tropical Cyclone Debbie is being released to the market.
  • Median rents could potentially increase over the next two quarters as the summer season commences.
  • Livingstone, Scenic Rim and Southern Downs rental markets are tight with vacancies below 2.5 per cent over the September quarter.

    Cassowary Coast vacancies eased from 5.9 per cent in June to 6.3 per cent in September, and remains the weakest rental market in Queensland.
  • The weekly median rent for three-bedroom houses and two-bedroom units held steady at $300 and $230 over the past year.

 

-ENDS-

 

Media enquiries:

REIQ Media and Communications Manager

Felicity Moore

T: 0408 020 428 E: media@reiq.com.au


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