What are vacancy rates? If you have ever looked at buying an investment property, you are sure to have heard this terminology before.
What are vacancy rates?
Vacancy rates are the percentage of how many rental properties in a location or market are currently without a tenant or vacant. The rate is calculated by using the number of vacant properties, multiplying that number by 100, and dividing that result by the total number of rental properties within that area or suburb. For example, if a suburb in Melbourne featured 2,100 rental properties and 63 were unoccupied, it means the vacancy rate is 3%.
Property investors review these rates to identify leasing activity before investing in the area or suburb. The vacancy rates are generally assessed and recorded on a monthly basis.
Understanding vacancy rates
Now that you know what vacancy rates are and how they are assessed, how do we understand them? Low vacancy rates are considered positive because they generally mean people in the area or suburb want to live there or can afford too. It demonstrates there are more occupied properties than not. On the other hand, higher vacancy rates mean the opposite. They indicate people may not want to occupy the area or they can’t afford it. If the trends are showing signs throughout many areas of Metropolitan Melbourne, this may demonstrate an economical problem. Perhaps unemployment has caused the change or some other financial crisis.
These statistics can help property investors learn the difference between supply and demand. As you look abroad to regional Melbourne, you may see higher rates as many many occupy their own own rather than rent.
Should we make decisions on vacancy rates?
Vacancy rates are an important factor to take note of in advance to buying an investment property. However, it should not be taken solely into account. There are many other statistics and property date to review that may have a higher weighting to your decision. You should also take close consideration to understanding your own circumstances and objectives. These will also enhance your ability to make a good financial decision.
If you’d like to learn more about buying a property, please don’t hesitate to contact us. We would welcome the opportunity to help with your property purchase. Our YouTube channel and Market Insights also provide a wealth of information to assist you with many areas relating to property.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
August 2020
