Vacancies tighten as rental demand rises

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.

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.

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.

REIQ CEO Antonia Mercorella said continued population growth required an increasing level of supply to ensure rental markets remained stable.

"Renting is slowly on the rise and we can see from the data that we need moderate levels of additional supply. However, investors are facing the twin threats of tightened lending criteria and uncertainty around negative gearing provisions should a federal Labor Government win the next election," she said.

"This climate is not conducive to buying an investment property. Shares, or other asset classes, become more appealing to investors who are looking to grow their personal wealth for their retirement," Ms Mercorella said.

"As the state’s economy improves and the jobs market in regional Queensland strengthens we are seeing people returning to regional areas and are looking first for rental accommodation.

"Markets such as Mackay, Toowoomba and Bundaberg, which are tight, are stabilising after a period of correction," she said.