No room at the inn: rental vacancy rates slump around Christmas

This compares with a 20-year average of 3.6 per cent. The industry benchmarks anything below a 3.0 per cent vacancy rate as indicative of an undersupply of rental accommodation.

Australian Bureau of Statistics data show that all States and Territories experienced population growth over the 12 months to June 2007, ranging from 0.7 per cent in Tasmania to 2.3 per cent in Western Australia.

"This has contributed in part to the shortage of housing stock, with the construction of new dwellings lagging well behind demand," says Noel Dyett, REIA President.

"Investors are also behaving cautiously in an environment of interest rate rises, with potential for more to come.

"As a result of very tight vacancy rates, over the past year, rents have increased significantly right across Australia," says Noel Dyett.

Darwin is now the most expensive rental location, with a 34.4 per cent annual increase in the median rent for a three bedroom house to $440 per week and a 51.1 per cent annual increase in the median rent for two bedroom other dwellings to $340 per week. Sydney and Canberra renters also pay $340 median weekly rent for two bedroom other dwellings.

The cheapest rental location is Adelaide at $255 per week for a three bedroom house, and $205 per week for a two bedroom other dwelling, although this represented annual growth of 8.5 per cent and 7.9 per cent respectively.

"Increasing house prices and declining home loan affordability are keeping more people in the rental market, with the short-term outlook difficult for lower income earners in particular," says Noel Dyett.

"Over the medium term, there should be an improvement in vacancy rates, and a slowdown in rent increases, as improved yields make it more attractive for investors to place their funds in the property market.

"There were double digit annual returns on three bedroom investment houses in Melbourne, Brisbane, Adelaide, Canberra and Hobart in the year to September 2007. Returns on two bedroom other dwellings were even better with only Sydney investment properties returning less than 10 per cent.

"Over five years, the average annual return on investment property exceeded 10 per cent in all capital cities except Sydney and Melbourne. Over ten years, every capital city exceeded the 10 per cent mark," says Noel Dyett.

Mortgage Choice National Corporate Affairs Manager, Warren O’Rourke says, "Our annual Consumer Sentiment Survey found that 44 per cent plan to invest in property in the next year despite the vast majority (92 per cent) believing interest rates will rise in the first quarter of 2008. Rates remain a bigger concern (45 per cent) than economic management at federal level (25 per cent).

"In fact, economic sentiment is overwhelmingly positive: 83 per cent were confident the nations economy will be strong during 2008. Despite rising housing prices, home loan affordability problems and the global credit crunch, sentiment has increased from last year’s 69 per cent".

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of