Canberra vacancy rates slip amid rental demand as investor interest falls

Canberra’s vacancy rate has fallen because of a drop in investor activity and a short-term increase in rental demand.

The number of vacant properties in the capital dropped from 3.5 per cent in the June quarter to 2.1 per cent in October, figures from PRDnationwide’s second Australia Economic and Property Report for 2015 show.

It reflects a nationwide fall in the supply of rentals – from 3.7 per cent to 2.3 per cent – despite high levels of residential construction.

PRDnationwide national research manager Diaswati Mardiasmo attributed the fall to the Australian Prudential Regulation Authority’s mid-year changes to housing investor lending, which forced the major banks to begin charging investors higher interest rates.

“This has scared a lot of investors out of the market, halting the growth in rental supply levels and causing vacancy rates to fall,” she said.

“Not as many investors are coming into the market and buying investment property; because of that, vacancy rates start to go down.”

Meanwhile, home loans were becoming more affordable for owner-occupiers because of low interest rates

Dr Mardiasmo said higher levels of owner-occupiers buying off-the-plan properties negated the impact of the construction market on vacancy rates.

“[The number of] first home buyers waiting for off-the-plan properties to be completed is resulting in a short-term spike in the rental market,” she said.

“This is because buyers are continuing to contribute to rental demand while they wait to move into their property.”

Fewer investors buying properties coupled with a higher demand for rentals balanced supply and demand, Dr Mardiasmo said.

“Over the past three months or so, investor finance commitment has decreased by about 7 to 8 per cent and, coincidently, at the same time, owner-occupier finance commitment has actually gone up by 7 to 8 per cent,” she said.

Dr Mardiasmo said the fall in vacancy rates was generally good news for investors and renters.

“First home buyers and owner-occupiers can sometimes feel threatened or priced out by investors,” she said.

“First home buyers are competing with fewer people in the market and investors can have a bit more certainty in their investment: knowing vacancy rates are lower means there’s a higher chance of my property being rented out.”