Inner-City Pain Still Regional Gain

Sydney and Melbourne CBD rental vacancy rates remain elevated despite falls in January, as demand for inner-city property is expected to remain affected by international border closures and potential city lockdowns this year.

But in 2021, regional Australia is largely expected to remain a landlord’s market, SQM Research released on Tuesday found.

While the data shows Melbourne recorded the highest vacancy rate of all the capital cities, Melbourne’s vacancy rate dropped over the month of January to 4.4 per cent from 4.7 per cent in December.

This time last year, Melbourne’s vacancy rate was 2.1 per cent.

Sydney also recorded a fall in vacancies over January with the rental vacancy rate sitting at 3.2 per cent.

Sydney’s CBD rental market also recorded falls, with vacancy rates down to 6.2 per cent after being as high as 16 per cent in May last year.

SQM chief executive Louis Christopher says the results are “more evidence” the worse is over for landlords in Sydney and Melbourne rental markets.

“The falls in vacancy rates for the month in those two cities, combined with the increased tightness in other cities and regions, has now brought rental vacancy rates down to below where they were prior to the Covid-19 outbreak,” Christopher said.

^{^ SQM Research National Rental Vacancy Rates}

“Now to be clear, CBD rental vacancy rates in both Sydney and Melbourne remain elevated, despite recent falls. And we remain of the view that there will not be a complete reversal of the sharp rise in rental vacancy rates experienced in these locations in earlier 2020,” he said.

Christopher says demand for inner-city property will remain affected by the closure of the international border as well as ongoing caution on future city lockdowns.

“This will mean 2021 will remain largely a tenant’s market in the inner cities but will also very much remain a landlord’s market for regional Australia.”

SQM notes that nationally, there are now fewer vacancies compared to January last year, just prior to the first Covid outbreak in Australia.

The national residential rental vacancy rate decreased by 0.2 per cent over the month of January 2021 to 2 per cent. This time last year it was 2.1 per cent.

The total number of vacancies Australia-wide is now 71,297 vacant residential properties.