- Sydney CBD has hit its highest vacancy rate on record, with the percentage of empty residences more than doubling over the last month to 13.8%.
- It’s the most acute aspect of what SQM Research managing director Louis Christopher calls “a mass exodus” being observed nationwide as the number of vacancies soars.
- The trend is putting downward pressure on rents, with Christopher pointing to a serious shakeup of the property market if it continues.
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Central business districts (CBDs) across the country are quickly becoming ghost towns as residents and businesses alike pile out.
In the last month, vacancy rates have soared across the country’s capital cities, with national vacancies rising from 2% to 2.6% in a matter of weeks, according to analysis from SQM Research.
“This is one of the largest one month rises ever recorded on our vacancy rates series,” managing director Louis Christopher said in a research note.
But it’s in the middle of some of the country’s biggest cities that the change is most notable. CBD vacancies in Sydney more than doubled, from 5.7% to 13.8% in a single month, as tenants fled the city.
“The blowout in rental vacancy rates for the major CBDs suggests a mass exodus of tenants occurred over the course of March and April. This might be attributed to the significant loss in employment in our CBDs plus the drop off in international students,” he said.
Brisbane and Adelaide both saw their CBD vacancy rate double as well, albeit from smaller bases, jumping to 11.3% and 6.6% apiece.
Looking at the capital city markets as a whole, Darwin proved the only exception to rising rates across the board.
Noting the surge of short term accommodation that has flooded back on the market as Airbnb owners are squeezed, Christopher said increasing supply – as well as shrinking demand – was also playing a big part.
Across Sydney proper, more than 7,000 extra vacancies have popped up, pushing the city’s total to nearly 29,000, or a vacancy rate rise of 1%. Melbourne meanwhile recorded the second-highest increase with 5,500 additional empty residences.
In fact, 21,000 extra vacancies cropped up across the eight different markets, helping provide some financial relief to tenants.
Advertised rents dropped 1.3% across all capitals over the month, with Sydney houses and units falling 2.9% and 0.9% each. Melbourne rents fell 1.7% and 2% across its houses and units, while houses in Brisbane dropped 0.9% while units actually rose very slightly.
Looking ahead, Christopher expects there’d be big consequences for the market if high vacancy rates don’t abate.
“If it is sustained throughout the course of the year, then we can expect far deeper falls in rents which will be good news for tenants but a disaster for landlords,” he said.
“There will also be economic consequences with further sharp falls in building approvals likely; thereby risking a major depression in our residential construction sector as well as the rather obvious risks for housing prices.”
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