Falling vacancy rates signal return to cities: Domain

Every capital city except Melbourne saw an annual decline, with Hobart recording the lowest vacancy rate at 0.5 per cent, followed by Adelaide and Darwin with 0.6 per cent, and Canberra and Perth with 0.8 per cent

Brisbane, Sydney and Melbourne have trended higher, with vacancy rates sitting at 1.4 per cent, 1.8 per cent and 4.2 per cent, respectively. 

According to Domain’s senior research analyst, Dr Nicola Powell, the sustained low vacancy rates across the smaller capitals mean that conditions will remain tight for tenants, with strong competition putting pressure on asking rents. 

Lowest and highest vacancy rates in each capital city

Melbourne and Sydney recovers

While Melbourne’s vacancy rate did increase annually, it recorded the biggest reduction over the month – from 4.6 per cent in March 2021. The Victorian capital also recorded its lowest vacancy rate since September 2020, and although it remains higher than pre-pandemic levels, the current rate was significantly lower than the 5.4 per cent peak in December 2020.

“Melbourne’s rental market has been affected by two lockdowns in 2020 that resulted in the vacancy rate bouncing twice, the second time higher than the first,” Dr Powell noted.

Of the capital cities, only Sydney recorded a monthly decline along with Melbourne. 

In contrast, Perth, Hobart and Canberra’s vacancy rates all increased from March 2021, while Brisbane, Adelaide and Darwin held steady at multi-year lows.

Ultimately, rental conditions have been shifting across Sydney and Melbourne after they bore the brunt of the impacts of COVID-19, particularly the decline in interstate and overseas migration due to travel restrictions, according to Dr Powell.

Looking ahead, she expects conditions to improve for landlords as vacant rental listings start to decline in these capital cities, flagging that Melbourne and Sydney are both dominating the top 20 areas experiencing a fall in vacant listings. 

“In fact, the regions with the largest fall in rental listings are largely situated within inner-city regions and close to universities with a large concentration of apartments and share houses – a sign that people may in fact be returning to our cities,” Dr Powell added. 

She noted: “The regions with the largest fall in rental listings are largely situated within inner-city regions and close to universities with a large concentration of apartments and share houses.” 

It led Dr Powell to consider it as a “sign that people may in fact be returning to our cities”.

Top 20 areas with biggest drop in vacant rentals