Insane increase in vacancy rates in Australian cities

Hi all - as can be seen in the screenshot file below, there has been a crazy increase in rental vacancies in our main cities during the last 3 months. NOTE - the report I have run is for eastern cities only - i.e. Sydney (2000). Melbourne (3000), and Brisbane (4000).

This is obviously due to impact of Coronovirus but could someone explain clearly why city areas in particular have been impacted?

So far, I understand that there are less students here in these cities to study at universities/colleges, etc, which would impact the number of people wanting to rent such accommodation (which are commonly units in cities) - but is there anything else or a combination of factors someone could describe?

The vacancy rises are crazy - e.g. look at postcode 2000 (Sydney), it shows 590 rental listings in March 2020 versus 1290 rental listings in June 2020!

Thanks.

 

Thanks Y-man.

So the existing students who were staying in those apartments have moved out (back overseas or for whatever reason), plus the fact that additional supply of apartments in the market - correct/

 

Also the lack of tourists means that a lot of airbnb stock is on the long term market. Even those travellers that come longer term are non-existant unfortunately.

 

You were correct there are less students, they all havent just vanished or moved to live under a bridge.

 

Hi Mel - that's great insight - so basically the tourists who were originally staying in the air b n b short stay accommodation reduced due to COVID, meaning the landlords MOVED their accommodation to longer term unit accommodation meaning this caused additional supply in longer term accommodation market - does this sound right?

 

More that we haven't had any inflows from overseas visitors that would normally be either taking up long term or airbnb accommodation (so the airbnb owners have had to put their properties on the market). Plus there's also been a lot of people that have gone back home overseas.

 

"Students" are still enrolled at universities, but all the courses are run online, so no need to travel into cities for uni. This is both international and domestic clients.

Business meetings are held online, no need to fly interstate and stay overnight.

As property leases expired post March, tenancies must be extended until at least September. This is another reason the economy is holding its breath expecting further vacancies across all postcodes later in the year.

 

In Sydney there are repatriation flights to Korea every week. There were upto 3 flights a week in March and April. So most people who are going back are people without citizenship or PR, and places where a lof of them lived, the city, Strathfield and Lidcombe are facing high vacancy. People renting houses will not rent units or apartments and hence I predict very high vacancy for apartments until Australian borders open.

 

Take Corona our the picture then the CBD was already in for a very tough time due to apartment glut, changes to lending, changes to foreign buying.etc. Throw in Corona and you have all the ingredients for an absolute bloodbath.

Whilst I don’t buy some experts 30% drop across the board. I think CBD and surrounds (south bank, Docklands) upwards of 30% is reality.

Edit - Replace reality with certainty.

 

This is my anecdotal experience from Perth (which has been through a massive hit on the rental market)

• Inner city CBD apartments very hard (we saw 20% vacancy and 50% rent reductions on the top end)
• Granny flats/1 beds (in the suburbs)/ irregular rentals - Very sustained periods of vacancy 4+ months were common with a 30% fall in rents.
• Good school catchments / suburban homes presented well - these were least impacted with a smaller fall but tenants had a flight to quality. (i.e. they budgeted $600 a week for rent so rather than staying in the same place for $400, they'd find a better place at $600).

Hopefully, east coast is not as bad as Perth because it was carnage. I'd expect if the east coast suffers the same fate as WA, it would have a much larger impact on the Australian economy. Only positive news, it's getting better now (but that was 5+ years of low to nil construction).

 

My Marsden QLD properties were leased out within 1 week of advertising. Lower end properties doing ok. I am getting $330 pw for each property.

 

As we move to make Australia as unattractive as possible for the Chinese. The question is will Nepalese and Indian students fill the empty apartments after we open the floodgates?

I see long term a change to Indian and Nepalese students over Chinese will see some benefits. A higher percentage will seek permanent residency and a willingness to work for less will be welcomed by businesses and see a drop in wages across all industries.

 

I just had 30+ groups at an open house for a very family friendly place in far west Sydney. The right property will still see strong rental demand.

 

They placed barriers on indian and nepalese students last year. Maybe they will open the flood gates

 

So is it a good time to buy?

 

I'd like to know this too.

I'm guessing it's a good time to be looking to buy, as long as you are patient and happy to wait until the bottom hits