This article is from the Australian Property Journal archive
Melbourne’s vacancy rates are at historically low levels and with investors avoiding the market, prospective tenants have little option but to pay higher rentals, according to Metropole Properties’ Michael Yardney.
Yardney said the latest Real Estate Institute of Victoria March figures show the overall vacancy rate for established properties in Melbourne’s metropolitan area was 1.8%.
In addition, despite predictions of vacancy rates bursting over 10%, the inner-city apartment market in the CBD, Docklands, St Kilda Rd and South Bank areas has fallen from 5.2% in April last year to 3.1%.
The residential vacancy rate for established inner Melbourne (0-4km from the CBD) increased slightly from 1.7% to 2.3%.
While in Inner Melbourne (4-10km from the CBD) remained very low at 1.2%, up from 1.3% last month. In Middle Melbourne (10-20km from the CBD) vacancies dropped from 2.7% to 1.5%.
The vacancy rate in Outer Melbourne (20km plus from the CBD) also increased marginally from 1.8% to 2.2%.
Yardney said the low vacancy rates are great news for investors who have not been able to increase the rents on their investment properties for a number of years.
“Many investors had to decrease their rentals to meet the market and minimise vacancies over the last few years. This together with stagnant or falling prices made many landlords question some of their investment decisions. Some even sold their properties because they could not see the light at the end of the tunnel,” he added.
Yardney said between 2001 and 2004, a whole generation of new investors swamped the property market adding significantly to the supply of dwellings for rent in most capital cities.
“At the same time, properties were affordable due to low interest rates and many potential renters became owners due to the first home owners grant. What this meant was that there was an oversupply of available rental properties and this held down rentals,” he added.
However, Yardney said with fewer investors buying properties in recent times and increasing demand from tenants now that housing has become unaffordable, vacancy rates are at historically low levels.
“This has resulted in significant rental increases. Vacant properties are being snapped up quickly by prospective tenants who have little option but to pay the higher rentals asked by agents and landlords,” he concluded.
Meanwhile, Wakelin Property Advisory said the current conditions in the Melbourne’s residential property market is offering investors the best opportunity in decades.
According to Wakelin, the best investment opportunities in Melbourne include the suburbs of Kensington, Thornbury, Elsternwick and North Melbourne.
She added that those suburbs have shown consistent capital growth and rental demand over time.
Hocking Stuart’s managing director Greg Hocking said the Melbourne residential property market is in the early stages of a sustained boom that nobody wants to admit.
“It’s like the elephant in the lounge room at a party. Everybody knows it’s there but nobody wants to acknowledge it,” he said.
Hocking said the first quarter of 2006 was a stellar period for the housing market with auction clearances at 70%-75% and Residex claiming 6% growth in Melbourne prices in the three month period.
He added that prices had been pushed along by a stock shortage – especially in the market where people are upgrading from $750,000 to $1.3 million as buyers scrambled to secure quality homes.
Hocking said the number of homes in the $2 million plus bracket was also experiencing a shortage as people sought out homes to reflect their new found wealth.
By Kathryn O’Meara
