Supply has reduced and diversity remains a problem. Photo: Ian Bushnell.
Canberra’s residential rental market has tightened this year, pushing up rents as new apartment releases have been absorbed and investors bail out.
A new report shows ACT vacancy rates have fallen to 1.6 per cent since the end of September last year, when, according to Cotality, the figure was a much healthier 2.4 per cent.
Its Quarterly Rental Review says that while Canberra rents have been stable over the past three months, in the past year they have risen 2.8 per cent, to record a median for all dwellings of $680 a week.
The median for houses was $725 a week and units at $598.
This puts Canberra in the middle of the capital cities pack.
Real Estate Institute ACT president and Director of Property Management at The Property Collective, Hannah Gill, said last year’s relatively high vacancy rate was driven by several large apartment settlements, particularly in the Woden precinct.
“That’s subsequently cleared quite quickly as it often does, and now we’re probably back to a more typical situation of what is actually available between those large settlements,” she said.
But she said investors were offloading their apartments in droves.
“The amount of stock we’re seeing exit our rent roll from investors deciding it’s no longer sustainable for them is not like I’ve ever seen before,” she said.
Ms Gill said this was due to a combination of regulatory and tax burdens, and a more favourable selling environment as interest rates ease.
“Owners have probably been waiting to see what happens, and maybe feel a little bit confident that buyers might be out there for them,” she said.
“There’s some quite comparatively priced stock for sale at the moment, which creates opportunities for first-time buyers, but we’re not seeing a huge uptake of investors buying, but certainly seeing a lot selling.”
The rental market is tight and rents are rising. Table: Cotality.
Ms Gill said houses were always in demand, but there were never enough, and they were vastly outnumbered by apartments.
She said the current tax environment in the ACT made it difficult for investors considering houses.
“When you look at houses as an investment, it’s really challenging for people from a cash flow perspective to hold houses, particularly because of land tax,” she said.
The perennial issue was the lack of diversity and choice in the market, often referred to as the ‘missing middle’.
Ms Gill said open homes were well attended, but not the “hordes of like 50 or 100” being seen in Sydney.
“There is demand, and there are lots of good quality tenants looking for stock. There’s just not a lot of diversity in the stock available,” she said.
Ms Gill expected the market to tighten further towards the end of the year, ease as some workers left the capital, and then tighten again.
She noted that a healthy vacancy rate was about 3 per cent, but since that had not been possible for so long, 1.6 per cent now seemed reasonable.
She would be happy if it didn’t fall below 1 per cent.
Cotality says houses in the inner south suburbs of Red Hill, Deakin and Griffith, along with Denman Prospect and Campbell, were the most expensive homes to rent, with median rents ranging from $900 to just over $1000.
Gowrie in Canberra’s south posted the equal highest annual house rent increase of 5.9 per cent for a median of $819, along with the new suburb of Whitlam.
The most affordable homes were units in Mawson and Lyons, both with a median of $491, followed by units in Lyons, Chifley and Gungahlin with medians under $550.
The most significant annual rent increase went to units in Griffith, possibly driven by new stock.
Nationally, Cotality says rents reaccelerated over the quarter with a 1.4 per cent rise, marking the largest three-month increase since June 2024 and a significant uptick from the 1.1 per cent lift recorded in the second quarter of the year.
Cotality says that over the year to September, rents rose by 4.3 per cent, which is 90 basis points higher than the four-year low of 3.4 per cent recorded over the year to May.
Brisbane and Sydney led the way with the uptick in the pace of annual rental growth, up 1.7 and 1.5 percentage points, respectively, compared to June.
Cotality Economist Kaytlin Ezzy said a persistent shortage in rental supply was spurring new rental growth, highlighted by the record-low vacancy rate of 1.47 per cent seen nationally in September, less than half the pre-COVID decade average of 3.3 per cent.
“Limited supply continues to be a major catalyst in rising rents, with the number of rental listings tracking approximately 25 per cent below the previous five-year average nationally for this time of year,” she said.
“Supply is particularly tight in the unit sector, especially in Sydney, which recorded both a new record low vacancy rate across its unit sector and broader dwelling rental market in September at 1.35 per cent and 1.64 per cent respectively.”
