Rental markets in small capitals and regional areas benefit from the exodus of residents of Sydney and Melbourne.
The latest figures from the Australian Bureau of Statistics (ABS) showed a substantial increase in the number of movers from Sydney and Melbourne amid the pandemic, with more than 60,000 residents leaving the two largest cities for other parts of the country during the year through March 2021.
This was particularly important in Melbourne, which lost 32,000 residents in the period following the COVID-19 recession.
"The displacement of the population out of Melbourne is a new trend that is compounded by the loss of out-migration which has supported Victoria's economic growth over the past decade," said Tim Reardon, Chief Economist of the Housing Industry Association.
The migration of over 31,600 Sydney residents to other parts of the country, although also due to the pandemic, was in line with trends of the past two decades.
"This population change is the main driver of the tight rental market that exists across the country except Sydney and Melbourne," Reardon said.
“As people move between states and build new homes, it is unlikely that they will have any intention of returning to Sydney or Melbourne. "
Decrease in vacancies, increase in rents
The latest vacancy report from SQM Research shows that the rental market continues to tighten, with vacancy rates falling in many parts of the country as rents rise.
Sydney and Melbourne had the highest vacancy rates in June, at 2.8% and 3.5%, respectively. However, these vacancy levels were slightly lower than the previous month.
On the other hand, the rest of the capitals, with the exception of Brisbane which has a rate of 1.3%, all have vacancy rates below 1%.
Darwin and Hobart had the tightest supply of rental properties during the month, with their vacancy rates still falling to 0.4%.
Overall, falling vacancy rates in capital cities drove the national figure to 1.7%, the lowest since May 2011.
Typically, a vacancy rate of 2-3% is considered "healthy", while a rate greater than 4% or less than 1% presents risks.
SQM Research chief executive Louis Christopher said low vacancy rates are pushing rents up, which could affect inflation later in the year.
"Vacancy rates have gone down in our largest capitals," said Christopher.
"In the meantime, there was further evidence that we have reached the peak of regional occupation and some relief for local tenants could arrive later this year, despite the latest foreclosure of Sydney .
"Rents are now accelerating in our largest capitals, which could have ramifications for the CPI [inflation] read over the next few quarters. "
Due to the limited supply of rental properties, rents have increased week to week.
For the week ending July 12, weekly house rents rose 4% on average for the capital cities to $ 575. Weekly unit rents also increased 2% to $ 419.
The only declines during the week were in the unit markets of Brisbane (0.1%), Canberra (3.7%) and Hobart (10.9%).
On an annual basis, unit rents in the capital markets registered a slight decrease of 0.5%. Sydney also saw a drop in unit rents to 1.5% while Melbourne saw a drop in both houses (1.5%) and units (9.5%).
A recent report from CoreLogic showed that the Australian rental market was able to record in July its highest annual rental gain since 2008.
During the period, national rents soared 7.7%, with Darwin and Perth registering the largest increases.
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