More for sale, less for rent

Source: Linkedin

The latest listings data shows a clear split opening up in the housing market: more homes for sale but fewer homes available to rent. This is not yet evidence of the full impact of the Federal Budget or the proposed negative gearing changes. The data only runs to the end of May, and the budget was announced on 12 May. But it does show the market conditions those changes are landing in. Buyers are seeing more choice, while renters are facing a tightening availability problem.

On the sales side, listings have been rising. Nationally, the 12-month rolling number of active sales listings is now around 607,000, while new sales listings are around 507,000. That suggests more vendors are coming to market and buyers have more choice than they did through the tightest part of the cycle. 

The increase in sales listings is not evenly spread. Canberra has seen the strongest annual lift, with active sales listings up 7.9 per cent over the year, although this rise was already underway before the Federal Budget. Melbourne has also recorded a notable increase, up 5.3 per cent over the year, while Sydney is up 2.2 per cent. These are the markets where buyers are seeing more choice, although the recent monthly data shows listings have eased slightly in all three. 

At the same time, sales volumes are not rising at the same pace. The 12-month rolling number of residential property sales is now around 557,000, but the latest trend appears to be easing. That points to a market where more homes are being listed, but buyers are becoming more selective. In practical terms, this gives buyers more room to negotiate and is already taking some heat out of price growth.

The rental market looks very different. Nationally, active rental listings are around 697,000 and new rental listings are around 644,000. The longer-term time series shows rental listings remain below earlier levels and have not recovered in the same way as sales listings. This is the key issue for renters: a home listed for sale does not help someone looking for a lease. Rental availability is what determines how much choice renters have. 

The city data shows the pressure is not evenly spread. Sydney is the standout concern, with active rental listings down 9.8 per cent over the year and 1.5 per cent over the month. Hobart, Canberra and Darwin are also showing sizeable annual falls in rental listings. So while the sales market is giving buyers more options, rental markets in a number of cities are tightening. That is the risk in the current environment: more homes may be available to buy, but fewer are available to rent. 

The Budget is designed to encourage more established homes to move from investor ownership into owner-occupation. In that sense, more homes coming to the sales market is what the policy is trying to achieve: more choice for buyers and less investor competition for established properties. The risk is the rental side of that shift. If more homes go to owner-occupiers, fewer remain available to rent. That is particularly problematic given rental availability was already falling before the Budget changes had time to flow through.