Monday, April 21, 2014

Rental vacancies, housing & population

Rental vacancies are back in the news with some recent numbers from REIQ: Rental vacancies tight in Cairns as market tightens up.
Vacancy rates in Cairns dropped from 2.2 per cent to 2 per cent last month
The numbers are quarterly not monthly I think? The Cairns Post also reports from the local REIQ representatives that the region has run out of stock and that renters should buy. Well they would say that wouldn't they?

The REIQ rate is derived from a survey of accredited members. Meanwhile the most recent HTW survey in CairnsWatch indicated a trend vacancy rate of 2.6% in February. I will await the next update from HTW for March however a quick look at some previous comparisons indicates the REIQ number will typically be lower.

SQM Research also provide some free info and graphics on rental data which is worth a look and also currently indicating a vacancy rate around 2.2% for Cairns. I have no idea how SQM aggregate this information however a search on their postcode data graphs also display the number of vacant properties for each postcode and throw up some interesting differences in vacancy rates within Cairns. Some of that difference may correlate to house v units but probably not all when it comes to south v north.

SQM%
Bonds
4868
1.3%
2623
4869
1.1%
2009
4870
2.0%
11458
4878
3.0%
1866
4879
3.7%
2937
Cairns
2.2%
20893


The Residential Tenancies Authority (RTA) also released updated quarterly data recently and the second column there is the aggregate number of bonds lodged at March 31st for each postcode. If I combine the nominal number of vacant properties in March from SQM with the bonds data I actually come up with a vacancy rate of 2.6% for Cairns but no idea on validity of this and it isn't clear what area SQM uses to define their 2.2% rate for the broader Cairns region.

The previously downward CairnsWatch trend vacancy rate recovery actually bottomed back around 2H2012 with the most recent report:
Vacancy rates in the Cairns rental market have been increasing since mid 2013, but are still indicating modest rental shortages relative to supply.
 
The bonds data from the RTA dates back to the March quarter 2011 and may provide some interesting perspective. This is the quarterly change in the number of bonds lodged for Cairns over that period (Postcodes 4868,4869,4870,4878,4879).

 
The aggregate number of bonds lodged actually declined slightly in the March quarter whereas in the two previous corresponding periods growth was quite strong. The trend in vacancy rates since mid 2013 also coincided with weakness in the labour market.

The RTA data for median rents also indicates relatively benign increases over the past year. The two largest cohorts: 2br units 1.8%; 3br houses 2.9%. It was actually the previous year when the vacancy rate was falling that rents for these lifted well above inflation: 2br units 7.8%; 3br houses 6.3%.  Historically low vacancy rates have not been exclusive to Cairns. Most capitals and other regional cities in Qld currently sustain comparable rates.

There have been some estimates recently of housing supply relative to population for Australia and the states. Some very rough back-of-a-drink-coaster calculations for Cairns based on 2% population growth (1.9% FY2013) and 2.5 persons per household (2011 census) would indicate a number still way above current building approvals.
 
 
Update: The SQM methodology:
SQM’s calculations of vacancies are based on online rental listings that have been advertised for three weeks or more compared to the total number of established rental properties. SQM considers this to be a superior methodology compared to using a potentially incomplete sample of agency surveys or merely relying on raw online listings advertised.

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