Low Vacancy Rates Are Great News For Investors
According to the latest vacancy rates released by SQM Research, the National vacancy rate remained unchanged at 1.8%, which is great news for those looking for an investment property. Generally speaking a rate above 3% is seen as a tenants market and as result rents can fall as tenants have a bigger choice and landlords are competing against each other. On the flip side, a rate below 3% is generally seen as a landlords market, where tenants are competing against each other for the limited properties that are available and as such rents are often pushed higher. So a national rate of 1.8% is very much a landlords market and generally speaking investors can expect that rents will keep on rising.
Given the current low interest rate environment and the tight vacancy rates leading to increasing rents, this means that the cost of holding an investment property will continue to fall. As the returns on property increase, property as an investment strategy will increase its appeal and more investors will enter the market. At the same time, some tenants will be in a better position to borrow money (since rates are decreasing) and as their rents are increasing, some will choose to buy. The increased activity from the investors and tenants who now wish to buy will increase competition on the available properties and as such prices will start to move upwards. That, in a nut shell is what we have typically seen in the past when interest rates are low and vacancy rates are tight.
Looking at the vacancy rates in a little more details, Melbourne actually has a high vacancy rate at 3.1%, whilst Sydney & Brisbane both have very low rates at 1.7% & 1.4% respectively. Brisbane’s rate is actually down from 1.6%, this time last year.
If you are considering taking advantage of the current property market, check out our latest off plan apartments