‘Positive outcome for tenants’: Canberra vacancy rates hit record high

The tide is turning on Canberra’s rental market after a new report revealed the capital’s vacancy rate hit a record high in May.

The city recorded a vacancy rate of 1.8 per cent, according to Domain Vacancy rates: May 2023, the highest of all capital cities. This was up from 1.7 per cent in the month prior.

While the number of vacant rentals was steady in the last month, the number of listings had doubled from this time last year. In May, there were 711 vacant rentals, a 145.2 per cent increase year–on–year.

“A balanced rental market is when the vacancy rate is sitting between two to three per cent … so that lift is a positive outcome for tenants, but it is still technically a landlord’s market,” said Domain chief of research and economics Dr Nicola Powell.

“But conditions have changed dramatically in the last 12 months.”

Thomas Hathaway of Hathaway Real Estate, a property management company, was expecting the vacancy rate to be higher.

“We’re experiencing the slowest market in more than 10 years and I’d attribute that to the change in the federal government, a change in hiring and the ability to work remotely … so there’s really no pressure to relocate here,” he said.

Hathaway said while there’s chatter about the lack of return from international students, it was the lack of interstate migration that has affected the rental market more.

“Canberra is a very insulated market, so when Sydney and Melbourne aren’t going well, we still have a bit of protection in Canberra but it takes a change in government hiring or change in government party for that to turn on its head,” he said.

“Two weeks before Christmas, I knew something was different but wanted to wait until the new year. Two weeks into the new year, it was very quiet in terms of the inquiries that we were receiving … we just haven’t seen the influx that we’re used to lately.

“Anything over $500-$600 a week is taking a lot longer to lease. We do get there in the end but it is taking a few more weeks before we find a tenant.”

Powell added that with the cost of living increasing, it would be no surprise to see people moving out of their own apartments and into sharehouses.

The latest Domain Rent Report noted that Canberra’s median rent price was $690 a week for a house and $550 a week for a unit, making it the most expensive city in which to rent a house, and the second most expensive for a unit, after Sydney.

“Because of the high cost of rent in the ACT and the escalating cost of rent, I think for some it may have meant they’ve gone back into a house share … what that does is take away an element of demand in the market,” she said.

When looking at Canberra regions, Molonglo Valley recorded the highest vacancy rate at 2.6 per cent, followed by Woden Valley, up 2.4 per cent, and the Inner North and the Inner South both at 2.2 per cent.

“At 2.2 per cent (and above), that shows that those regions are technically a balanced market,” Powell said.

The four regions are also Canberra’s most expensive in which to buy, recording medians of more than $1 million, and exactly $2 million in the Inner South, the Domain House Report revealed.

Hathaway noted that rentals in the Inner South would typically linger on the market longer.

“Those properties typically ask for higher rent and with the cost of living increasing, people aren’t making those jumps to those larger properties but the regions that are doing well are those outer regions like Gungahlin and Belconnen,” he said.

While Hathaway hasn’t seen this market in a long time, he’s hopeful the demand for rentals will pick up later this year.

“The last time I saw this market was when Tony Abbot put a freeze on public hiring and we had tenants asking us to drop the rent or they’ll move. It was definitely a tenant’s market,” he said.

“Now that the budget is out and the departments know what they’re about to spend, I’m hopeful that at the end of the year, we’ll have that rush into Canberra again.”