No room at the inn as ‘staycations’ are set to boom

Australia’s rental market continues to tighten and will enter crisis territory in many regions of Australia.

Rental crisis looming for many regions

Although international travel has come back to some extent, we expect to see a surge in ‘staycations’ this year, as Aussies fear being shut out on return.

Travel and flight rules are changing quickly at the moment, and over the coming months, we expect booming rental demand in destinations such as Sunshine Coast, Gold Coast, and the northern New South Wales coast, among others.

SQM Research report that Hobart had under 100 rental vacancies in November, for a rental vacancy rate of just 0.3 per cent, which represents a phenomenally tight market.

Everything is already full in many of the lifestyle locations, and that’s only going to intensify over the Christmas break. Aussies have built up a huge war chest of savings, an unprecedented $1½ trillion in cash and deposits. We’ve seen the renovations boom; next comes the staycations boom.

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Vacancies under 1 per cent in five capitals

Vacancy rates are considerably lower than a year ago, as more Australians have bought second homes, and rental tenancy regulations have shifted incrementally in favour of tenants over landlords.

SQM’s figures showed rental vacancies of 1.5 per cent, down from 2.1 per cent a year ago, resulting in surging asking rents, especially for detached houses.

As international students return and new migrants begin arriving again, and eventually tourists additionally, we can expect to see rental vacancies falling to record low levels in many suburban and regional locations.

Everything is already full in many of the lifestyle locations, and that’s only going to intensify over the Christmas break.

CBD vacancies are still elevated in Sydney and Melbourne, and some areas still have a strong supply of new apartments, as documented in our quarterly Oversupply Report.

But overall, we expect tight rental markets to persist in 2022 as immigration comes back online, and that’s already reflected in five of the eight capital cities recording vacancy rates of under 1 per cent for the first time.

Residential vacancy rates tightening across Australia
Figure 1 – Residential vacancy rates / Source: SQM Research

No room at the inn

Asking rents for houses surged 14.1 per cent nationally over the year, and for units, rents were up 9.1 per cent, according to SQM Research figures for the year to November. Many holiday locations are expected to have the ‘zero vacancies’ signs out over the Christmas period, according to SQM’s research, and that accords with what we’re seeing too.

Regulations and changes to borrowing terms have made it harder and harder for landlords to get properties financed and rented out over the past 4 or 5 years, and now that’s coming home to roost.

We do think landlord buyers will be more active in 2022, however, as this is the fastest growth we’ve seen in asking rents for about a decade-and-a-half.

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