THERE’S STILL NO RELIEF IN SIGHT FOR RENTERS WITH VACANCY RATES RETURNING TO RECORD LOW LEVELS ACROSS THE COUNTRY
Domain’s January Rental Vacancy Rate Report found after a seasonal rise in December, the national vacancy rate is back to its lowest point on record, at 0.8 per cent.
Across the country, there are 36.1 per cent fewer vacant rental properties compared to this time last year, with vacancy rates falling in all capital cities except Hobart.
Domain Chief of Research and Economics, Dr Nicola Powell said the influx of migrants, coupled with low supply, has hit renters hard.
“Low supply is driving a landlords’ market across all capital cities, worsening an ongoing rental crisis in many parts of the country,” Dr Powell said.
“The continued growth in asking rents, along with increasing demand, exacerbates a highly competitive environment for tenants.”
The vacancy rate in Sydney and Melbourne dropped to just 1 per cent in January, which is a record-low level for both markets.
Across Sydney, median house rents remained steady over the quarter, at a record high, while unit rents surged 4.5 per cent over the quarter and continue to outpace houses.
This is driven by the decline in rental stock, which was at a record low for the month of January, tracking 44 per cent lower annually according to the report.
Melbourne’s vacancy rate has tumbled from 5.6 per cent in December 2020, to the current record lows.
Brisbane’s vacancy rate (0.8 per cent) dropped this month but remains high compared to most of 2022.
This drop is driven by a fall in the number of vacant rental listings, but it appears to be moving away from the highly competitive conditions tenants saw last year the report said.
Perth and Adelaide remain the most competitive cities for potential tenants, with both seeing a decline to 0.3 per cent.
Perth is at a record low, while Adelaide is 0.1 percentage points higher than the record low of 0.2 per cent last seen in October 2022.
Both cities’ rental stock declined annually and are at all-time lows for the month of January.
EXPECT PROPERTY PRICE DECLINES OF UP TO 11% IN 2023
With interest rate rises weighing on prices, a new outlook report is forecasting property price falls of between 7 and 10 per cent nationally.
That prediction comes from REA Group’s PropTrack Property Market Outlook report, which was released today.
According to the findings, price falls will be seen across all of Australia’s capital cities this year.
Sydney, Brisbane and Canberra are all set to see the greatest dips, of -8 per cent to -11 per cent.
In Melbourne, house prices could see declines of -7 per cent to -10 per cent, with the report earmarking Hobart as expectant of similar price drops.
Riding out the next 12 months with more moderate falls are Adelaide and Darwin, with both cities predicted to see minor falls of -3 per cent to -6 per cent, while Perth has been flagged for moderate drops of -5 per cent to -8 per cent.
The PropTrack report’s predictions have been made on the proviso that the cash rate will jump another 50 basis points in 2023 to 3.6 per cent from its current level of 3.1 per cent, before remaining on hold for the remainder of the year.
Report author, and PropTrack director of economic research, Cameron Kusher, said, “We’re expecting prices to decline by up to 10 per cent nationally in 2023, with greater falls expected in the larger capital cities.”
He added that demand for regional properties is also likely to slow, and “given prices have seen stronger growth in these areas than within the capital cities, we expect to see price falls in these markets too.”
The latest predictions follow the fact that prices fell by 2.3 per cent nationally in 2022.
“With prices down 4.3 per cent from their peak, a fall of up to 10 per cent this year would result in cumulative declines of close to 15 per cent since the start of the downturn,” Mr Kusher stated.
“Importantly, this fall would represent a decline of around half that of the decline in borrowing capacities and would still have national home prices sitting above their pre-pandemic levels.”
Looking nationally, the report flagged that even with -10 per cent declines, “national property prices will still be more than 18 per cent above pre-pandemic levels.”
RBA DISHES OUT 2023’S FIRST CASH RATE DECISION.
Two months after its last meeting, the Reserve Bank of Australia (RBA) has delivered its debut cash rate decision of the new year.
With the recent Australian Bureau of Statistics (ABS) consumer price index (CPI) data suggesting inflation needs further stifling, Australia’s central bank decided at its monthly board meeting to raise the official cash rate by 25 basis points to 3.35 per cent.
There has been much discourse surrounding the RBA’s decision with real estate industry heavyweights, including Angus Raine and Hayden Groves, imploring the bank to stem cash rate hikes off the back of positive CPI data for last November and a belief that the full brunt of last year’s eight consecutive rate hikes is yet to be completely felt.
However, the latest batch of CPI data released last month and covering the 12 months to December 2022 found annual inflation had hit a 30-year peak of 7.8 per cent.
Anneke Thompson, chief economist at CreditorWatch, said, “While there are early signs that consumers are now starting to reduce spending and businesses are less optimistic about the year ahead compared to 2022, the RBA clearly wants to see some sustained evidence of a cooling economy before pausing any further cash rate increases.”
She explained that the cash rate’s trajectory “will depend heavily on January’s retail trade result,” explaining that December’s results “showed a marked slowdown in consumer spending in all categories and states, with sales falling 3.9 per cent month-on-month.”
Moreover, Ms Thompson outlined that “inflation also appears to be moderating, and we should see further drops in the rate of price growth as data is now being measured off 2022 figures when price rises had already kicked in.”
Commonwealth Bank head of Australian economics, Gareth Aird, said: “An important consideration for the RBA is that fixed rate mortgages have so far insulated many Australians from interest rate increases.”
He clarified that “there is a lag effect on previous rate hikes and large volumes of fixed rate mortgages expiring this year, and higher monthly borrowing payments should cool demand.”
“Taking the cash rate further into restrictive territory by the RBA could prove recessionary and counterproductive.”
In the eyes of LJ Hooker’s Mathew Tiller, the RBA’s decision is unlikely to surprise mortgage holders or incite waves of distressed sales.
“Mortgage holders on low fixed loans have been saving for the past two years while everyone else has been paying higher rates, so it is likely they have a savings buffer,” he said.
Following the RBA’s consistent rate hikes throughout the back end of 2022, he added that “people know higher interest rates have been coming and they would have been planning forward and budgeting rather than waiting until they cannot afford it.”
He described decreased listings to start the year as “good news for sellers” as this means “there is not much competition out there between properties, and while prices are softening, the pace of decline has slowed.”
Thank you for your ongoing support!
Regards David, Benjamin & the Team at DB Philpott Real Estate