Something’s got to give

1% vacancy across long term rentals

The Cairns rental market (and for that fact, much of the country’s) is wild. An interesting turn of phrase perhaps, but when we are down to circa 1% vacancy across long term rentals (and have been for months now) and there are as many stories of rental stress as I am hearing, that’s wild.

And it isn’t even the rental stress that goes with rent levels that start to push budgets (COVID aside, tenant selection still tends to have a fairly robust income assessment which is designed to minimise this where possible), it’s the difficulty of finding a rental full stop.

Whether their landlord has had a change of circumstances and needs to move back into the property, the market has moved and its time for a sale (generally to an owner occupier) or its simply a newcomer to Cairns, there is an incredible challenge when it comes to getting into that property.

It’s not the property managers at fault (seriously, I have seen some incredible inspection and application processing numbers coming out of some agencies), and its not fair to point the fingers at “the Mexicans” (from south of the border) either. Rather, it’s the result of a prolonged period of already tight vacancy, a lack of meaningful new development numbers and just that little push to get things from shoes that feel mildly uncomfortable to being 3 sizes too small. And on fire.

I am hearing about professionals with good rental history and employment applying for properties for week after week, and missing out each time. Families that can’t find an appropriate sized house and are having to split the kids up between apartments, and even turning to AirBnB and hotel accommodation to fill the gap while they keep hunting.

So how do we fix it? Well we don’t want to turn away the demand, because a shrinking population does not a successful City make. Conversely, adding to supply doesn’t happen overnight.

In the short-term, there are opportunities for those that had been geared up for holiday letting, to comfortably transition to a long-term rental. Returns might not be quite as good, but I have seen some get close, with a lot less stress. To make a meaningful difference though, we need new construction, and with the rise of a “build to rent” product in the capital cities, there might be opportunities for new institutional investors to go big on a different kind of product to meet this demand. Whatever the solution, we’ve got some time yet.