The opening of borders prior to the most recent Victorian lockdown provided a glimpse of how short-term rentals are ready to ramp up again, leading to a shortage of residential lets in Melbourne and Sydney.
Although rental vacancies have been at a record high, they seem certain to be swallowed up as residential lets are withdrawn from the home market and put back into tourism.
The only difference is that the tourists are more likely to be interstate travellers than bargain-seeking overseas tourists. And its all juiced by exotic ads by Airbnb offering images of family and friend reunions, and even pets get in on the act, while fantasy holiday lets like geodesic domes pique curiosity.
Back in the real world, all of this means we are already heading for a tightening of the market for residential lets in city centres, according to expert analysts.
“Home rental vacancies have continued to fall over May with most capitals now reporting increasing shortages of both houses and units for rent,” Dr Andrew Wilson chief economist with Archistar says.
“Although Inner-suburban and CBD unit markets in Melbourne and Sydney continue to record high vacancy rates, the number of advertised vacancies in these areas has declined sharply over the past month – falling by 10% in Melbourne and 5% in Sydney.
“The re-opening of borders has resulted in increased tourist and business travel that is fuelling increased demand for the short-term accommodation tenancies in inner Melbourne and Sydney that added to supply in the permanent rental market over the past year.
“Vacancy rates for houses continue to fall with most capitals now remarkably at or under 1% and, although Sydney and Melbourne are hovering around 2%, rates in those capitals are declining.
“Similarly, unit vacancy rates also continue to fall across-the-board with all capitals reporting declines over May and, with the exception of Melbourne and Sydney, most rates are now well below 2%,” said Dr Wilson.
“Most capitals reported increases in house rents over May with the exception of Melbourne and Darwin. House rents have skyrocketed over the past year with Adelaide, Perth, Darwin and Canberra reporting extraordinary results approaching 20%. Brisbane, Adelaide, Perth and Canberra have also recorded extraordinary unit rent increases over the past year.
“With vacancy rates continuing to tighten, higher rents can be expected and clearly impacting housing affordability. Canberra remains clearly the most expensive capital for house and unit rents and significantly higher than the other capitals.
“Rental vacancies continue to fall and rents, in response, continue to rise with no prospect of an easing of what are clearly accommodation shortages. Although Sydney and Melbourne inner city and CBD unit markets are still offering plenty of choices for tenants, vacancies in those areas are now falling sharply.
“Record low activity from investors over recent years due primarily to credit restrictions together with subdued new home building have acted to undersupply rental markets. Increased demand from prospective first home buyers pushed out of housing markets by booming home prices will exacerbate the mismatch between rental supply and demand in most capitals and continue to place upward pressure on already high rents.”
It seems the challenge for various state and local governments will be how to balance the demands of holiday hosts, tourists and residential renters.
No one at any level of government is going to want to do anything to restrict the flow of tourist dollars for the next year or two, so tenants who aren’t locked into long-term leases could be facing lean times ahead.
