What is happening in the Cairns rental market?

Tuesday 23 Jul 2019

The Cairns rental market is getting tighter. Vacancy rates have been under 2% since April 2016 and rent for almost all sectors of the market has been climbing since 2013. According to Herron Todd White’s May report Vacancy rates for houses stood at 1.7%, and units at 1.8%, and anecdotal evidence in the marketplace puts it even lower. The same report shows that the average median rent for a house at $420 per week and units at $300 per week.

So, what is driving the market? The obvious pressures are here, low new building starts, population increase and higher employment but there is another factor that is not often in play. The market is shrinking! In the year to June 2019 14% fewer properties have been advertised for rent. This is a big change in the marketplace and reflects the issues in the investment market. It is our belief that this has been a trend since January 2018.

What we are seeing across the real estate industry is a lack of activity from the investor and it is not surprising. It is normal in our industry for investors to divest themselves of their investment property when it is time for them to capitalise. What we are seeing is that owner occupiers are buying and taking the properties out of the rental market. New investors are not taking the properties back into the pool.

The investment market has not been supported by APRA regulation and bank lending policies, so they have just not been active. The news is not all bad as recent changes in APRA guidelines and interest rate reductions make it a good time to borrow. Certainty regarding capital gains tax and negative gearing following the election will help. It is our belief and hope that the investor will slowly re-enter the marketplace. This should build stock levels.

David Forrest