10 Feb Market wrap for 2014 and what’s in store this year
Today, Market researcher Louis Christopher joins us to look back at how we ended 2014 and what he thinks is ahead for this year.
Kevin: One of the things that’s of most interest to most investors is what’s happening with vacancies, how many tenants are going to be on the move. Traditionally, we see at the end of the year that a lot of people are on the move. That’s certainly been reflected in the figures, the vacancy rates that have been published by SQM research.
The man from that organization, Louis Christopher, joins me on the line. Hi Louis?
Louis: Good day there, Kevin.
Kevin: The December figures for vacancy rates, what do we see?
Louis: We saw nationally a rise in vacancies. Our vacancy right now stands at 2.6% nationally, which approximately translates to about 57,000 properties being vacant on the market nationally for the month of December.
Kevin: That’s firmly in the middle of that 2% to 3% band, which is an area I think you closely watch, isn’t it?
Louis: That is so. Generally speaking, we believe that that’s a market that’s in equilibrium, where it’s neither tenants nor landlords controlling the market and putting a downward or upward influence up on the market. But I can’t stress enough that each city is really telling its own story, so we’re seeing some cities where we’re getting big rise in vacancies right now, both month-on-month and year-on-year, which is a concern.
Kevin: Whereabouts are they, Louis?
Louis: Surprise, surprise, Kevin. They’re in the mining- or commodities-related towns. We’re pretty concerned about Darwin at this point in time. We’ve been seeing basically about seven to eight consecutive months now of rises. We have a vacancy rise in Darwin of 3.4%, and there was a massive increase on the November result. That’s already putting downward pressure on rents on our measurement. We’re seeing fuller rents in Darwin now over 8% year on year, so we’re very concerned about Darwin.
Perth is also another weaker city. We have a vacancy rate– it doesn’t sound that high – of 2.8%.
Kevin: It’s a struggling market, Perth, isn’t it right now?
Louis: Yes. It’s relative. Back in the beginning of 2013, we had a vacancy rise in Darwin of under 1%. It’s that relative movement, going from under 1% all the way up to 2.8%, which is putting a lot of stress on landlords, because it’s definitely clearly turned into a tenant’s market, and hence the reason why we are seeing falls in rents in Perth, as well.
Kevin: What about some of the other markets? Let’s say Brisbane. What’s happening there?
Louis: In Brisbane, things have been rather steady. We haven’t really seen a big move either way. We have a vacancy rate in Brisbane for December of 2.7%. Now, there’s a bit of seasonality there. We tend to get higher vacancies in each December. That’s not just in Brisbane. We do see that in other capital cities. This time last year, Brisbane we had a vacancy rate of about 2.6%.
Kevin: I see. It’s not a big movement up, and it’s consistent with what’s happening nationally, isn’t it?
Louis: Yes, that’s right. One thing we are seeing in Brisbane – and you might recall I raised this about 12 months ago – is we’re definitely seeing on going elevated vacancies in the CBD itself. Right in the heart of the city saw quite a lot of vacancies.
Kevin: We’re going to see that continue I would think, with the amount of stock that’s coming on, as well. Just looking around at the number of cranes on the horizon, it always tells a bit of a story.
Louis: That’s correct. I think for Brisbane, for the CBD, vacancy rates are likely to go higher from here rather than lower over the course of 2015. I have to say, though, on the east side of Brisbane – like Wynnum – we’re seeing tighter vacancy rates there. We’re seeing vacancy rates actually back below 2%.
We like the east side of Brisbane, and we don’t mind the west side. We think that’s slightly favoring landlords there. It’s the CBD itself that really seems as though it’s favoring tenants right now.
Kevin: Yes, which is a bit surprising. You look on the west side of Brisbane over around the Toowong area, which carries a lot of students, as well. I know one of the reasons why the vacancies seem to spike at the end of the year is because of students vacating.
Louis: Yes, that’s right. It’s not just students. Lots and lots of people decide to make a change before Christmas or just after Christmas for the New Year. So you do see a lot of movement around the country, not just city by city but in the regions, as well. That’s the reason why you see the seasonality in December, where we tend to get higher vacancy rates in December.
Kevin: We’ll talk to you again real soon. Louis Christopher from SQM Research. Thanks for your time, Louis.
Louis: Thank you, Kevin